Earlier quoted context omitted.
Mid 20s, but that's not a useful way to tell someone you think they're wrong.
Yeah, it's a bit early. Omniscience starts fading out later.
having an opinion == omniscience?
My company sold for $100M and I got zilch – how can that be?
271–280 of 391 posts
Re: My company sold for $100M and I got zilch – how can that be?
#272Heidi Roizen, VC, most definitely does not feel Former Millionaire's pain. Yes, liquidation preference overhang is the mechanism. However, the company got sold for $100M. Who sold the company? The founders + the VCs and they got theirs. They could have structured the deal to give the employees something. They didn't. The advice here is simple. Walk. Former Millionaire owes absolutely nothing to the new company. Stayi…
I thought that name sounded familiar...
"From 1996 to 1997, Roizen was Vice President of World Wide Developer Relations for [Apple Computer]"
Also, I find it very weird that people project the current name of a company back in time anachronistically.
Re: My company sold for $100M and I got zilch – how can that be?
#273Earlier quoted context omitted.
Often enough that it is mentioned in the article.
Carve-outs in general are mentioned in the article. A common type of carve-out: the employee retention pool. The article does not say that founder carve-outs are common. I'm sure they've happened, but you said they happen "often", as a way to get founders to greenlight deals. Do you know how often that happens?
I don't know how often that happens, so I can't add anything to that part of the discussion.
I can only reason that it depends on whether the founder still has voting control of the company, but that's implied with "greenlighting".
WeWork is a similar situation where the founder is effectively getting a carve-out to greenlight the deal. That's only one example, though.
Re: My company sold for $100M and I got zilch – how can that be?
#274Options holders are not shareholders. Options holders are not owners of the company. Options holders are not investors in the company.
Too many forget these things and are shocked when then find out some event doesn’t treat them like one of the above.
Re: My company sold for $100M and I got zilch – how can that be?
#275Earlier quoted context omitted.
It's fine to want preferred stock, but it's pretty rare for employees to ever receive it (unless they put up cash) -- it's reserved for investors to avoid a sandbagging + abscond with the money raised scenario.
And employees deserve to be sandbagged? That seems monumentally unfair...
Preferred stock (and specifically, liquidity preferences-- the common 1x, nonparticipating term) exists to ensure that if investors put in $10M for 20% of a company, you don't immediately sell the company for $10M and give them $2M back, and split $8M among yourselves. The deal is structured so that the investors have their option of either getting their original money returned or their share of the proportional share of the returns.
Re: My company sold for $100M and I got zilch – how can that be?
#276This matters more now that the current crop of tech companies have taken so much money. In the old days, when software companies sold software rather than traditional services enhanced by software, it was common to get to profitability around the B round and then never take any more investment after that. Google took $25-35M and then nothing until IPO, running the company from 2001-2004 off cashflow. Microsoft took n…
> Microsoft took nothing except a small mezzanine round (to align incentives with the I-bankers) right before IPO. > to align incentives with the I-bankers What does that even mean?
When a company goes public, they usually hire an investment banking firm to manage the process. The I-bank does a lot of work to properly value the firm and price the IPO right, but part of their job is also drumming up interest among potential buyers of the stock. Like any securities offering, the IPO is basically an auction where the amount of money you raise, and the terms you raise it at, depends critically on how many people you can get interested in your offering and how excited they are.
One way to incentivize the I-bank to do their very best to get the highest price for the shares, and to keep the price high, is to make them shareholders themselves. Thus, Microsoft did a small (Crunchbase reports it as $1M) financing round with their investment bank right before IPOing, despite not needing the money at all. Any dilution is more than made up for by the better IPO price; basically, the I-bank got to share in their upside by making their upside bigger.
Re: My company sold for $100M and I got zilch – how can that be?
#277Earlier quoted context omitted.
Instagram had what, 12 employees when it got bought for 1 billion? I worked for a small company that fired half the employees (10->5, mostly marketing/sales execs) and absolutely nothing changed. Our revenue actually increased over the next year, not to mention gross sales not paying those salaries. We were originally going to replace them but decided to wait it out for a full year because we realized we didn't need…
> Instagram had what, 12 employees when it got bought for 1 billion? Which was really a pittance. I acknowledge hindsight is 20/20, but it's interesting to see posts here lamenting that startups hire too many people, when selling for much too little is surely a more grievous financial mistake. Or to put it another way, if they had 75 engineers when they sold for a billion, the tragedy would still not be that they had…
Yeah that is really too bad.
Re: My company sold for $100M and I got zilch – how can that be?
#278> Again, let me emphasize, this is not inherently unfair. I guess our definitions of what is "unfair" are quite different. I think a better term here would be "illegal". It's most certainly not illegal - but I definitely would not consider it fair . Companies throw options at employees - or potential employees - like candy. They imply, explicitly or not, that when the company gets big and successful, these options ar…
I think if a venture is unsuccessful employees shouldn't expect to make money from their options. A venture that raises $60MM and sells for $100MM 4 years later is a failure. Making nothing in a case like that seems fair to me. What is perhaps unfair, is if the employee worked for substantially below market wages all of that time, and particularly if they were given a much rosier picture than was accurate. But we sho…
> if the employee worked for substantially below market wages all of that time
For an engineer that could get a job at FAANG or similar, I think this is pretty much universally true for all startups.
Re: My company sold for $100M and I got zilch – how can that be?
#279“In fact, one of my kids was recently interviewing at a startup and I told her to ask about the preferred overhang — she said the interviewer looked at her like she was asking about his sex life! She didn’t get a call-back.” I’ll do you one better. This is like asking someone you’re about to have sex with if they have an STD and then having them act indignant and not answer. And you should do the same thing in both c…
It’s also not the most polite/politic way to ask about it. A neutral way to get the same information is to ask about the cap table and then go from there if needed.
Re: My company sold for $100M and I got zilch – how can that be?
#280Earlier quoted context omitted.
VCs really don't care about "sweat equity" or "discounted salary equity". They believe that if you don't bring actual cash to the table then you aren't risking as much as them (even though they are only putting their clients money, not their personal money in most cases). That's one reason I didn't have trouble bailing on a startup I helped start. We took in $1.5mm, did some things poorly (such is life but learned go…
I was the third employee at a startup. I was young and stupid and thought "20,000 shares" was a lot. I worked my ass off, it was immensely stressful, but we built and launched a product. I later found out it wasn't much of a stake at all- .1% and that's even before any dilution shenanigans and all that. We took a paycut part of the way through, had our 401k contributions slashed and such. A company in the space (but…
I was the third "employee" at an internet startup (maybe the fourth, I forget) after the CEO and the lead tech guy, and I got...$5/hr as a 1099 consultant. That's actually more like $8 in today's money. I just looked it up and it was the same year eBay (AuctionWeb) was founded. Coincidentally my boss asked me to (with hindsight) basically create eBay and I didn't have a clue where to start or the necessary hubris. After that, they figured I wasn't useful as a programmer (I was hired to answer the phones).