Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

My company sold for $100M and I got zilch – how can that be?

medium.com

Post reply on HN
Print view View original

381–390 of 391 posts

Re: My company sold for $100M and I got zilch – how can that be?

#381

Post by NotSammyHagar »

WalterBright wrote: post #369
4ntonius8lock wrote: post #368

Earlier quoted context omitted.

If you agree that both put in $50 worth of something, then why does one get something while the other nothing? How is that honest? The employee was investing time for the stock, the investor fiat. The employee was offered 1% of the company. Reasonable, everyday people will understand that to be 1% of all money that comes in on a sale after paying legal fees and bond holders. The rest of the convoluted mess, while leg…

> The employee was offered 1% of the company. No, they weren't. They were offered stock. Stock can always be diluted by future stock issues. > Reasonable, everyday people will understand that to be 1% of all money that comes in on a sale after paying legal fees and bond holders. People who accept stock options and don't bother to learn about them have only themselves to blame. The information isn't hard to come by, i…

I think your argument is at best disingenuous. People leading startups know that people taking stock as a good part of their equity know that the vast majority of startup employees actually don't know how stock equity works in those circumstances. They don't like it when they ask for more cash comp, and it's to the benefit of the company founders that regular employees don't understand. It's also the case that people should educate them.

But like we make laws controlling how real estate loans work to protect people from shysters, we should probably have a lot more required documentation for companies that offer stock in pre-ipo companies.

Re: My company sold for $100M and I got zilch – how can that be?

#382

Post by vanniv »

enra wrote: post #364
vanniv wrote: post #308

Earlier quoted context omitted.

Those companies aren't that different than the dot-com era companies. "We're not $boring_business, we're $boring_business_but_internet" (or, today, it'd be boring but mobile)

I think the difference is still that many dot-com era companies didn't have much or any revenues, definitely not in billions.

Yeah, it's true.

This cycle, investors realized that OK, maybe we have to see revenues to believe it's a real business.

But, if you look at things like WeWork, sure, there's revenue, but there's never even been the hope of eventual profit. The business model fundamentally destroys value.

Re: My company sold for $100M and I got zilch – how can that be?

#383

Post by superqd »

greggman2 wrote: post #377
superqd wrote: post #319

Earlier quoted context omitted.

There is a deep flaw in this logic. Person A and Person B are both investing the same amount, just in different forms. Person A converted their 100k into 1 year of time . Person B converted their 1 year of time into 100k of money . They both put in 100k of something , B put in 100k worth of time, A put in 100k worth of money. If we assume a fair market rate for the conversion, then essentially this is a perfect excha…

They are not equally invested. using your method Company fails A risked $100k money got 0. B risked $100k time got 100k money. A is now at -$100k B is at zero My guess it's you'll claim A got $100k of your time so A is at 0 as well but if we follow that logic in other places we can see how it doesn't work. A pays $10 for B to make a pie B pays $10 of time to make a pie A now resells pie for $20. A does not own B any…

The problem is you missed the full comparison.

Person A has not the time to invest into building the product, so they invest money, 100k's worth of dollars. Person B has not the money to invest into building the product, so they invest time, 100k's worth of time.

So if we compare dollars in the event of company failure, we have:

Person A is now at -100k

Person B is now at 100k

Person A is now at +1 years

Person B is now at -1 years

Again, this means they both invested equally. What is usually harder to see is the time investment. But Person A gains one year of work they did not have to do on the product (via their investment). Person B loses the year they invest/spend on the product.

Purchasing a product does not imply joint ownership. Consumers do not partly own the profit of the Producer. However, if A and B decided to build a pie product together then yeah, they'd split the profits. Which is what is at stake here in this overall discussion: how should profits fairly get split when two or more parties contribute the resources to build it.

Re: My company sold for $100M and I got zilch – how can that be?

#384

Post by superqd »

nl wrote: post #380
superqd wrote: post #356

Earlier quoted context omitted.

No, that doesn't mean that at all. If a company fails, investors don't have to return the time they've invested by putting in extra years of work, so it follows that those who invested time wouldn't return the money they received. Investor A puts in 100k of dollars, the company fails they've lost 100k worth of dollars. Worker B puts in 100k of time, the company fails, they've lost 100k worth of years. The point is, t…

Investor A puts in 100k of dollars, the company fails they've lost 100k worth of dollars. Worker B puts in 100k of time, the company fails, they've lost 100k worth of years. This is complete nonsense. The worker has received $100k for their time and keeps that money. The investor has nothing. If you try to argue that the workers wage doesn't count for some reason, then you also should argue that the investor's time c…

The investor is not the least bit worse off. He gains what the worker loses, and the worker gains what the investor loses. The worker gains the 100k, but the investor gains the extra year of work.

That is, the investor, effectively, gets 2x the time they otherwise would have, because they traded some of their money for someone else's time.

Whereas the worker has now lost 1 year, though they did gain 100k for the time they spent.

If you do not believe that the investor is trading their 100k for something of equal value, then please demonstrate this. For it is this equality that underpins my argument.

Saying the investor "has nothing" is naive, since, as with others, you are ignoring what they traded their dollars for.

Re: My company sold for $100M and I got zilch – how can that be?

#385

Post by 4ntonius8lock »

WalterBright wrote: post #372
4ntonius8lock wrote: post #370

Earlier quoted context omitted.

> They are not, or they would be priced the same. If this was market based, you'd be right. But if it is legislative based, then this is the definition of circular logic. Given that the structure of preferential stock is legislative based, it is circular reasoning. I count risk based on what percentage of a person's net worth and potential earnings are tied up in the securities. That renders a different perspective o…

> Which is an argument that lacks intellectual cohesiveness when you are simultaneously supporting the legal structure that removed such a situation from the average investor. Not exactly. The courts are there to enforce the contracts, and protect against fraud. They are not there to protect people from making ignorant decisions and failing to do things like read the contracts they sign. They are not there to remove…

> Honesty has nothing to do with meritocratic (in markets)

Again, I can't really talk about economics and capitalism with someone who believes what you wrote.

Either we agree that honest markets are more meritocratic (in which case you are admitting to being wrong) or we can't really go any further.

Re: My company sold for $100M and I got zilch – how can that be?

#386

Post by nl »

superqd wrote: post #384
nl wrote: post #380

Earlier quoted context omitted.

Investor A puts in 100k of dollars, the company fails they've lost 100k worth of dollars. Worker B puts in 100k of time, the company fails, they've lost 100k worth of years. This is complete nonsense. The worker has received $100k for their time and keeps that money. The investor has nothing. If you try to argue that the workers wage doesn't count for some reason, then you also should argue that the investor's time c…

The investor is not the least bit worse off. He gains what the worker loses, and the worker gains what the investor loses. The worker gains the 100k, but the investor gains the extra year of work. That is, the investor, effectively, gets 2x the time they otherwise would have, because they traded some of their money for someone else's time . Whereas the worker has now lost 1 year, though they did gain 100k for the tim…

In your example, the company fails.

The investor now has an investment in nothing, worth zero dollars.

The worker has $100k.

Re: My company sold for $100M and I got zilch – how can that be?

#387

Post by nl »

superqd wrote: post #383
greggman2 wrote: post #377

Earlier quoted context omitted.

They are not equally invested. using your method Company fails A risked $100k money got 0. B risked $100k time got 100k money. A is now at -$100k B is at zero My guess it's you'll claim A got $100k of your time so A is at 0 as well but if we follow that logic in other places we can see how it doesn't work. A pays $10 for B to make a pie B pays $10 of time to make a pie A now resells pie for $20. A does not own B any…

The problem is you missed the full comparison. Person A has not the time to invest into building the product, so they invest money, 100k's worth of dollars. Person B has not the money to invest into building the product, so they invest time, 100k's worth of time. So if we compare dollars in the event of company failure, we have: Person A is now at -100k Person B is now at 100k Person A is now at +1 years Person B is…

This literally makes no sense, and it wrong even by your own math.

Person A is now at -100k: Agreed

Person B is now at 100k: Agreed

Person A is now at +1 years: If you are valuing 1 year at 100k, then no - they are at zero years. They put in $100K over 1 year, so the two cancel each other out.

Person B is now at -1 years: Again, they have been paid at the rate of $100K for 1 year, so they are at zero years.

Again - I reject this "losing a year" thing. The investor hasn't gained a year at all - you can't lose or gain time. But if you value 1 year at 100K then they have paid for 1 year, but that means they have by-passed other opportunities.

If they invest $100K in 2019 and the company goes bust in 2020 how have they gained a year?

But even ignoring that (!!) your math doesn't work.

Re: My company sold for $100M and I got zilch – how can that be?

#388

Post by superqd »

nl wrote: post #387
superqd wrote: post #383

Earlier quoted context omitted.

The problem is you missed the full comparison. Person A has not the time to invest into building the product, so they invest money, 100k's worth of dollars. Person B has not the money to invest into building the product, so they invest time, 100k's worth of time. So if we compare dollars in the event of company failure, we have: Person A is now at -100k Person B is now at 100k Person A is now at +1 years Person B is…

This literally makes no sense, and it wrong even by your own math. Person A is now at -100k: Agreed Person B is now at 100k: Agreed Person A is now at +1 years: If you are valuing 1 year at 100k, then no - they are at zero years. They put in $100K over 1 year, so the two cancel each other out. Person B is now at -1 years: Again, they have been paid at the rate of $100K for 1 year, so they are at zero years. Again - I…

Let's say you have 1 year left to live. You have two things you want to do, X and Y, but X and Y take 1 year each to complete. It is the end result you want, but each result takes 1 year achieve, and you only have 1 year left to live. What can you do?

Well, if you have enough money, you can pay for someone else to work on X while you work on Y. In this way, you have been able to get 2 years worth of work done, in only 1 year. In effect, you doubled the number of years you had to spend on getting things done.

Spending money in exchange for someone else's work is a time multiplier on the one who spends the dollars. They get more done in less calendar time, i.e., because they effectively have more effort-time by converting their money to someone else's calendar time.

The entirety of my reasoning in predicated on one simple thing: an investor trades in their money for something of equal value, and the worker trades in their time for something of equal value.

This means, by definition, they are equal partners in the exchange, and hence must split the profits equally. It also means they each gained and lost equally, because they traded evenly.

If you do not agree with the foundational assumption I am making, point out the error in that, as all else necessarily follows.

Re: My company sold for $100M and I got zilch – how can that be?

#389

Post by kevstev »

nostrademons wrote: post #27

This 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…

A late reply, but I was just rereading this thread and it reminded me of a few recruiter pitches that seemed to seem it was a positive that a company just had a series E round of funding.

I mean on the one hand, they do have enough of a business case to get that many checks, but on the other, my first thought was that there was no upside at all there most likely.

Re: My company sold for $100M and I got zilch – how can that be?

#390

Post by nl »

superqd wrote: post #388
nl wrote: post #387

Earlier quoted context omitted.

This literally makes no sense, and it wrong even by your own math. Person A is now at -100k: Agreed Person B is now at 100k: Agreed Person A is now at +1 years: If you are valuing 1 year at 100k, then no - they are at zero years. They put in $100K over 1 year, so the two cancel each other out. Person B is now at -1 years: Again, they have been paid at the rate of $100K for 1 year, so they are at zero years. Again - I…

Let's say you have 1 year left to live. You have two things you want to do, X and Y, but X and Y take 1 year each to complete . It is the end result you want, but each result takes 1 year achieve, and you only have 1 year left to live. What can you do? Well, if you have enough money, you can pay for someone else to work on X while you work on Y. In this way, you have been able to get 2 years worth of work done, in on…

The investor isn't trading their money for time, they are trading it for a share of a company.
Post reply on HN