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If founders treated their investors the same way they treated their employees

software.rajivprab.com

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Re: If founders treated their investors the same way they treated their employees

#201

Post by H8crilA »

vmception wrote: post #199
nostrademons wrote: post #86

So founders do treat some of their investors like this - look at every ICO, and a lot of dumb overseas money, and a good number of friends/family/fools rounds. And conversely, there are some employees that they treat with kid gloves, who basically get the investor treatment. Look at executive hires. The difference is basically two letters: "No". Most institutional investors have the ability and inclination to say no…

ICOs aren’t investments, they are consumer products, sold into a hot consumer market where the consumers want to flip them. But where the consumers don’t actually know they are consumers. This isn’t semantics, token sales are counted for as revenue. Yes, its too bad that there is a colloquial action called “invest” and a legal term called “investor”

> This isn’t semantics, token sales are counted for as revenue.

This is obvious when you think about it for a second, but also - lol. ICOs created a capital structure level that's completely outside of the capital structure :)

Re: If founders treated their investors the same way they treated their employees

#202

Post by wtracy »

vmception wrote: post #199
nostrademons wrote: post #86

So founders do treat some of their investors like this - look at every ICO, and a lot of dumb overseas money, and a good number of friends/family/fools rounds. And conversely, there are some employees that they treat with kid gloves, who basically get the investor treatment. Look at executive hires. The difference is basically two letters: "No". Most institutional investors have the ability and inclination to say no…

ICOs aren’t investments, they are consumer products, sold into a hot consumer market where the consumers want to flip them. But where the consumers don’t actually know they are consumers. This isn’t semantics, token sales are counted for as revenue. Yes, its too bad that there is a colloquial action called “invest” and a legal term called “investor”

In these situations, I think it's meaningful to differentiate between "investors" and "speculators".

Re: If founders treated their investors the same way they treated their employees

#203

Post by wtracy »

quickthrower2 wrote: post #159
richardbrevig wrote: post #121

Earlier quoted context omitted.

I don't believe he's talking about the employer, he's discussing the emotional well-being a job seeker would need. If the job seeker hates their own job, they're more likely to jump from one bad situation to another bad situation. But you're right, and I've done that myself. Where I hated a job so badly and just pretended and smiled as much I could until someone hired me out of that situation.

Oh yeah I’ve been in this boat of jumping from bad to bad. That is probably what sparked my comment. Something about experience being the best education also the most expensive! The problem is i didn’t realise there is really no way to tell what a job wi be like until you’ve done it for 1-2 years! Therefore if you think “oh i really want to work for them because they are offering a good job” that’s the weakness I had…

> They might be the only shop in town offering a Haskell job

I learned this the hard way: Do not let the technology stack be the deciding factor in which job you take.

Skipping the Cobol job is reasonable. Picking the only Haskell job because it is the only Haskell job isn't.

Re: If founders treated their investors the same way they treated their employees

#204

Post by vmception »

H8crilA wrote: post #201
vmception wrote: post #199

Earlier quoted context omitted.

ICOs aren’t investments, they are consumer products, sold into a hot consumer market where the consumers want to flip them. But where the consumers don’t actually know they are consumers. This isn’t semantics, token sales are counted for as revenue. Yes, its too bad that there is a colloquial action called “invest” and a legal term called “investor”

> This isn’t semantics, token sales are counted for as revenue. This is obvious when you think about it for a second, but also - lol. ICOs created a capital structure level that's completely outside of the capital structure :)

Yeah its pretty marvelous when you look at a quadrant chart of scalable things you can sell, tokens are better than drugs.

That’s pretty unprecedented.

They are even more weightless, more fungible, cheaper to produce than both legal and illegal drugs and you can pay people from your illiquid premine and deduct that against your liquid revenue. Primarily because people are willing to be paid in the tokens (unlike other consumer products or even shares), and because they aren't illegal like drugs.

Due to their “property” designation and again non-illicit status, donations to non-profits are extremely flexible too, for greater tax benefits at cost-basis or fair market value.

People should look into making them better instead of looking at what went wrong.

Re: If founders treated their investors the same way they treated their employees

#205

Post by rmellow »

jchallis wrote: post #141
bquinlan wrote: post #91

Earlier quoted context omitted.

>I could be a cog in a giant corporate machine, or I can have a measurable impact where I work. I think that point can support working for either a big company or a small company depending on what type of impact you are looking for. I've worked for startups in the past and have had a huge impact on the startup but almost no impact on the outside world because the startups just weren't tackling very visible problems.…

The chromecast screensaver is the background on the TV in my Airbnb. Multiple guests have told me how much that screensaver makes them feel at home when they travel, and makes the world a little less strange.

Fun fact: those screensaver photos are taken by Google employees!

Can't find a source for that, but have many times corroborated that through a Google search. Peter Norvig is one of them.

Re: If founders treated their investors the same way they treated their employees

#206

Post by vmception »

wtracy wrote: post #202
vmception wrote: post #199

Earlier quoted context omitted.

ICOs aren’t investments, they are consumer products, sold into a hot consumer market where the consumers want to flip them. But where the consumers don’t actually know they are consumers. This isn’t semantics, token sales are counted for as revenue. Yes, its too bad that there is a colloquial action called “invest” and a legal term called “investor”

In these situations, I think it's meaningful to differentiate between "investors" and "speculators".

People should look at the business model as normal privately held companies:

When the consumer market is hot, sell more product.

When the share market is hot, sell more shares.

When the credit market is hot, sell more debt.

Token issuers currently make enough to just stick with the consumer market, but make too little subsequent revenue relative to their primary sale to access the equity and corporate bond market. This can be fixed by a continual stream of token sales for different products, currently the consumers that think they playing arm-chair angel investor dont want to see this industrialized because they think the teams should be married to the “vision” they “invested” in, and liberally call any predictable deviation from that outcome an “exit scam”. But token factories will happen and already exist, and will be taught in Harvard Business School later this decade.

In the token market, this is currently controversial because consumers themselves dont know what they are.

Outside the token market, this is currently controversial because “ICO” “blockchain” are bad words and there also is a general ignorance perpetuated by misrepresented exposure to things going wrong, combined with the same consumer-investor misalignment when those people do “invest” in something. It doesn't really matter, the market can bear what the market can bear.

Re: If founders treated their investors the same way they treated their employees

#207

Post by mdorazio »

a13n wrote: post #147
mdorazio wrote: post #69

Always absent in these kinds of essays/posts is the reason why startups are able to get away with this. If it didn't work, obviously the options games would have stopped a long time ago. A lot of people don't want to admit that there's a small army of young, naive employees who are enamored with startups and are perfectly willing to sign up for below-market salary and extremely unfavorable options terms in exchange f…

Options aren't a game. They're preferable to employees, for tax reasons. If startups gave employees shares, then employees would have to pay taxes on those shares, even though they're illiquid - so you're paying taxes on something you can't even sell! Options solve this problem well, by delaying the tax burden until the equity is actually worth something. If it ends up worth nothing, you don't exercise your options a…

Counterpoint: options are a game when the alternative is not shares, but more actual salary.

Re: If founders treated their investors the same way they treated their employees

#208

Post by yourapostasy »

StreamBright wrote: post #38
try-perforate wrote: post #13

Isn't this capitalism? Labor and capital are two different factors of production. If you're willing to take the pay cut and risk associated w/ joining a startup, but are unhappy with the returns, why wouldn't you just keep your job, invest the $100,000, and get access to the preferential terms given to capital?

It would be classical free market capitalism if anybody with any money could be investing in anything. This is not the case in the US where you need to qualify as an investor prior of being able to invest in startups or companies.

It is possible to form Reg D 506 (d) or (b) syndicates with up to 35 non-accredited investors for example, but risks and costs pretty much steer most offerings towards only accredited investors. The costs of sustaining the deal flow and associated compliance to work with 100 non-accredited investors who stump up the same amount as 1-10 accredited investors, plus the increased legal risks, make it very financially unattractive to cater to non-accredited investors.

This is the "no one comes away happy" outcome of bad actors on both sides of the desk in the past.

Re: If founders treated their investors the same way they treated their employees

#209

Post by alasdair_ »

Analemma_ wrote: post #180
xur17 wrote: post #129

Earlier quoted context omitted.

> Someone who is just getting into tech may be allured by a 50k salary and "1 MILLION OPTIONS!!!!" This reminds me of a job offer from a startup I interviewed with that offered me a specific number of options, but wouldn't tell me anything that I could use to value them, effectively forcing me to value them at $0.

You should always value options at $0 even if they do give you information. Take the probability that the company won't go under, multiplied by how much you'll lose in further dilution rounds, multiplied by the likelihood that you'll get screwed by some other kind of dirty-dealing, and startup equity almost always comes out to be worthless. Work at one anyway if you want the experience, but never kid yourself that yo…

>You should always value options at $0 even if they do give you information.

If the company has meaningful revenue and a solid margin AND they have already paid out to employees in previous liquidity events, it's pretty likely the options have value above zero.

Re: If founders treated their investors the same way they treated their employees

#210

Post by rexreed »

The oft-cited quote is that it's very, very, very rare to make money working as an employee at a Startup. The farther you are away from the founding team, the harder it is. And 99 times out of a 100 even the founding team doesn't make anything, if there's an upside exit at all.

If you want to work at a startup as a non-founder employee, go into it knowing that you're taking the risk and getting little of the potential upside reward. If the pay is good and you like the company and the work, then do it. But any stock options will be mostly meaningless.

I wish Founders would just let Employees participate in seed stage financing and be in with the same terms as early investors if the employees want to truly risk it.

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