If founders treated their investors the same way they treated their employees • Hacker News Board

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

#211

Post by icedchai » Tue, Aug 18, 2020, 9:04 PM UTC

alasdair_ wrote: post #209

Analemma_ wrote: post #180

Earlier quoted context omitted.

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.

If that is the case, you're not working at a startup. You're working at a actual, real, proven business.

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

#212

Post by mooreds » Tue, Aug 18, 2020, 9:04 PM UTC

rrrrrrrrrrrryan wrote: post #181

mooreds wrote: post #148

Earlier quoted context omitted.

> I think engineers would do well to know that you are a COST CENTER to the business and the people who run it. They need you to make their product so they can make money but they hire you begrudgingly. I don't agree. Engineers are sometimes a cost center, but they can also be a profit center. You can help revenue by decreasing expenses by automating something or noticing how the business is wasting money w/r/t tech…

> You can help revenue by decreasing expenses by automating something or noticing how the business is wasting money w/r/t tech and taking steps to help fix that I once worked with a process engineer who, a few months after being hired, had identified a number of manual processes as low hanging fruit that could be easily automated. He presented his findings to upper management, argued that they should let him build ou…

> You'll be treated as a cost center so long as you let other people think of you as a cost center, but if you can frame your contributions in a way that makes your value proposition obvious, it's possible to be treated differently while doing largely the same work.

So true! I have to drop this link, as it does a much better job than any number of comments at explaining this: https://www.kalzumeus.com/2011/10/28/dont-call-yourself-a-pr...

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

#213

Post by cybersol » Tue, Aug 18, 2020, 9:06 PM UTC

yalogin wrote: post #172

Are these terms for stock any different for even the first 20-30 employees? Or are they also get the same terms? Why do people say being the first 20-30 employees in a start up is good?

The terms are often the same, but the percentage is more like 1% than 0.1%. Also the easy way up the management chain is to be a warm body in a rapidly growing company.

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

#214

Post by alecbenzer » Tue, Aug 18, 2020, 9:08 PM UTC

lkbm wrote: post #66

seibelj wrote: post #3

Valid reasons to work for a startup: - You are a cofounder. - You have little experience and you are using this to break into the industry, and get experience on many different technologies ("wear many hats"). - They are working on a very specific problem or using a specific technology that you strongly desire to work on and it's difficult to do it anywhere else. - You want to work a certain way (remote, on the beach…

Main reason: it's more fun. I could be a cog in a giant corporate machine, or I can have a measurable impact where I work. I can stay in my lane and do my specific job tasks, or I can run around putting out fires and helping wherever help is needed. I mindlessly build the specific design product handed me, or I can guide my own work in accordance to the needs of our customers and the business. I can follow policy and…

Been at 2 series A/B startups for the past ~3.5 years. It was a really fun 3-6 months followed by 3 very not fun years.

My N is low, they were both non-Bay (NYC) startups, maybe some startups are fun, maybe I'm really bad at picking startups, but I think a startup's culture is often as much or more of a crapshoot than the startup's business.

Was at Google before, and it was fun for only a bit as well, but definitely not as actively non-fun as my last 3 years has been.

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

#215

Post by dpeck » Tue, Aug 18, 2020, 9:08 PM UTC

colinrand wrote: post #43

A few things I have noticed missing from discussion of why/why not to join a start up is prestige and lineage. Early engineers from start ups that get traction carry an aura of prestige (warranted or not is a separate question) that they were witness to 'something special' that happened. Second is lineage. Like it or not, cohorts of engineers often stick together and create informal networks that help populate their…

The first part I’d say is even less likely than a big payout. That is only going to be true if it’s at a very well known consumer brand or just within a very specific niche

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

#216

Post by icedchai » Tue, Aug 18, 2020, 9:11 PM UTC

phone8675309 wrote: post #190

justinclift wrote: post #145

Earlier quoted context omitted.

> ... now I stand I make low 7 figures from the equity on this last company (publicly traded now). Isn't that a "never need to work again" situation though? eg, you've effectively freed up your future to put time into whatever you want?

Low 7 figures to me would be between $1,000,000 and $3,000,000. I don't think that I would call that "never need to work again" money. It's between 10 and 30 years of my salary. A good lump sum to stash in the retirement fund. Maybe retire at 55 instead of 65, but definitely not "never need to work again" money.

It depends on your lifestyle. If you ask the early retirement / FIRE forums, they'll tell you you're good to go.

If you have 2 million, you can conservatively (meaning a low 3% - 4% withdrawal rate) take out 60k to 80k a year in perpetuity. Can you live on 60k - 80k a year? Consider you'll be paying a lot less in taxes since it's all capital gains. If your normal salary was 100k ish, you probably can.

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

#217

Post by rurp » Tue, Aug 18, 2020, 9:15 PM UTC

owenmarshall wrote: post #111

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…

Knowing your BATNA is critical for negotiating anything, including employment. One of the best ways to accomplish this is to avoid shopping for a job when you’re unhappy with the one you have; when your best alternative is “I keep working at the place I like with the people I’m on good terms with” it’s far easier to start from that no and let yourself be convinced.

> avoid shopping for a job when you’re unhappy with the one you have.

The problem with this is that bad jobs don't often turn into good jobs, so job hunting under those circumstances is usually the best option. I do agree that it's worthwhile to actively look for other jobs even when you're happy with your current one.

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

#218

Post by ashtonkem » Tue, Aug 18, 2020, 9:34 PM UTC

pc86 wrote: post #196

ashtonkem wrote: post #150

Earlier quoted context omitted.

I think you’ve got cause and effect a bit backwards. > whenever you feel you’re treated unfairly, walk away . People will stop treating you unfairly. Walking away from a bad deal certainly prevents you from being taken advantage of in that moment, but it will do nothing to prevent the next company who knows nothing about you from trying to hoodwink you again. While the ability to say no to a bum deal is important, it…

> but it will do nothing to prevent the next company who knows nothing about you from trying to hoodwink you again But what it does means is you won't leave until you get a good deal . And when's the last time someone left a good deal for a bad one?

People leave for worse deals all the time, usually due to information imbalances or downright fraud.

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

#219

Post by biztos » Tue, Aug 18, 2020, 9:35 PM UTC

seibelj wrote: post #3

Valid reasons to work for a startup: - You are a cofounder. - You have little experience and you are using this to break into the industry, and get experience on many different technologies ("wear many hats"). - They are working on a very specific problem or using a specific technology that you strongly desire to work on and it's difficult to do it anywhere else. - You want to work a certain way (remote, on the beach…

I've seen people hired into startups that just got their A-round and they made sub-FAANG market rate plus whatever crazy stock incentive they agreed to. And the exit strategy was usually acquisition by FAANG anyway.

So I would add as a valid reason:

- Startup will pay you as much as anyone else, and won't be boring.

Caveat: may only apply to early hires!

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

#220

Post by eximius » Tue, Aug 18, 2020, 9:40 PM UTC

This thread has reminded me of a concept (whose term I am struggling and failing to remember) that is as important, if not more, than what is traditionally thought of as the cap table.

In the case of a sale, investors with would get their money back (possibly at an inflated ratio) before the rest of the money from the sale is distributed via equity.

This is important because it means that even if you get favorable stock terms, you might still be screwed (or at least disadvantaged) if there is no money left after this money is paid out.

Can anyone remind me of the term?