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VC Decries Airbnb’s Recent Funding for Founder Control and Cashout
51–60 of 163 posts
Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout
#52A few thoughts: 1. It is bad form for this sort of thing to be aired publicly. It may give us a voyeuristic fascination on something that is depicted as an internal intrigue within a prominent up-and-coming startup but this is fundamentally company confidential information that is not capable of being aired publicly without significant distortion. Who can answer the implied charges of impropriety? Those most directly…
The 3 points you make forget the little guy: that early employee, whose employee number has 1 digit, who trusted the founders when he accepted the option grant and put 60 hours of work or more each week in the hope of not being screwed when the founders negotiate confidentially with the investors on how the company will move forward. There's no SEC for privately-held companies, there is basically no oversight and the…
Very good point - I actually had just edited my point 3 (first sentence) to add this point, posted the edit, and then saw your post. This definitely fits into the equation in an important way as part of the policy discussion. Thanks for highlighting it.
Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout
#53A few thoughts: 1. It is bad form for this sort of thing to be aired publicly. It may give us a voyeuristic fascination on something that is depicted as an internal intrigue within a prominent up-and-coming startup but this is fundamentally company confidential information that is not capable of being aired publicly without significant distortion. Who can answer the implied charges of impropriety? Those most directly…
I completely and vehemently disagree with your response. You are acting as if the dot com bust never even happened!! I have no clue how old you are, but if you are over the age of 35, maybe you'll remember that the dotcom "boom" was merely a two-fisted cash grab from investors into the pockets of the founders and VCs. I certainly hope that as in industry, we don't make the same mistake twice in 10 years, lest it will again kill future investment in Silicon Valley for the next subsequent years.
It probably sucks to be the founders of AirBNB to have this info exposed, but they have the opportunity to respond to Chamath's opinion. It certainly seems as though they are in an indefensible position, but maybe there's a good reason why they are withdrawing millions from an as-of-yet unprofitable company. As I mentioned in another comment, I don't recall Bezos ever doing this.
You seem to have forgotten about the lessons of the dotcom boom. It's not about the founders or the VCs, it's about the investors. During the dotcom boom, founders and VCs both screwed the investors out of billions upon billions. A great deal of money was lost during the bust, and a lot of peoples' lives were affected. If you were around Silicon Valley at the time, you would know that the amount of jobs lost during the bust was worse per-capita than Detroit in the 80s. As a morbid datapoint, commuting on the 101 got much better at the nadir of the bust, because so many peoples' jobs were lost. The company I was at had half a dozen layoffs in 1 year, and lost 50% of the employees. The last thing I want to see is another round of smash-and-grab VCs and founders bilking more money from investors, and killing investment again, possibly putting me out of job because the SV economy contracts again.
The point that Chamath made is that the money is ONLY going to the founders and maybe some initial investors. Employees are being locked out of this. Say what you want about companies like Google and Facebook, but Brin, Page and Zuckerberg never turned their companies into cash-grabs where only they benefited.
We need MORE transparency, not less, so when seemingly shady things like founders withdrawing millions from the company coffers occurs, I would like more information about this.
I want to know if this is another second-coming of the dot-com bust, where I could lose my job and be unemployed for months/years because VCs, founders, and Wall Street were all complicit in sucking and spending money from investors, and then causing a complete seizing of investment in the Valley.
I have to admit that SARBOX actually did end up exposing companies like Groupon. At least there is a modicum of transparency in the S-1 filings so that people could see the accounting techniques being used by Groupon.
Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout
#54Chamath's response:
http://uncrunched.com/2011/10/01/chamath-palihapitiyas-state...
Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout
#55A founder who believes in his business, will never cash out early. period. He would always get more after an IPO or exit. So why would he? I assume the founders are not stupid, they know their valuation is not justified.
This line of thinking has been thoroughly discredited. Many of the most successful companies today had founders that took money off the table early. If they didn't believe in the company they could just sell it today for $500 million (or whatever) and put $50 million in their pockets instead of $5 million.
Taking money off the table implies selling their stake, ie. shares. They didn't sell their shares. They gave themselves a one-time dividend.
Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout
#56Separately, when you look at successful tech companies, it seems that dividends are an approach used by cash rich operations to distribute excess earnings — in fact, the most successful, cash rich tech company in the world, Apple, hasn’t issued a dividend and they have more than $75B in cash! The fact that companies can get away with something like this is absolutely ludicrous. It illustrates just how far the stock m…
Ah, but if they paid it out in dividends, it would be taxed!
Apple's cash hoard is functioning as a giant insurance policy against Apple's stock price, which if you buy and hold, never gets taxed.
Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout
#57Chamath's response: http://uncrunched.com/2011/10/01/chamath-palihapitiyas-state...
You mean "Arrington's response?"
Oh how Michael loves to insert himself into every piece of drama he can get his hands on.
Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout
#58Earlier quoted context omitted.
You're correct. VCs play a game where they win with other people's money. They make good money regardless of performance (for example, 10-year VC returns seem to be trailing 10-year stock market returns). They make a killing if their portfolio companies do well. Are you suggesting that this VC pattern justifies the actions of founders who take $21M as dividends ? (to be more precise - founders of a young private comp…
Are you suggesting that this VC pattern justifies the actions of founders who take $21M as dividends ? I don't think that particularly requires moral justification, any more than an engineer saying "That offer is interesting but I would prefer $5,000 more and an extra week of vacation" requires moral justification. Capitalism happens. Sometimes, it even happens to rich people. Edit for context: "Capitalism happens" i…
You must be interpreting this article very differently from many others since you're trying to turn this into an example of VC greed, but I don't quite understand how.
My reading is that the VCs for this round are not getting screwed in any way, they know exactly what they're getting (X% of the company for $Y, with $Z ending up in the company's accounts). For them it doesn't really matter whether all the shares they buy are newly issued or whether some are sold by existing shareholders, as long as X/Y/Z are the same.
Any possible investors in earlier rounds are not particularly getting screwed, since they have shares that will now receive a dividend.
But the employees with options are getting shafted, as they have been dilutied more than if the founders' cash-out had happened by them selling shares.
Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout
#59Earlier quoted context omitted.
Zuckerberg, Moskovitz, and Parker each got $1m from Accel when they raised their $12.7m Series A according to David Kirkpatrick's The Facebook Effect.
The reason there was competition between VCs, this is a different motivation and the amount is not that high.
$3M on 12.7M investment is higher percentage wise than what the Airbnb guys are asking. Plus, it's earlier stage.
Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout
#60Earlier quoted context omitted.
In Silicon Valley all the best people aren't in it just for the money. Can't say that about Wall Street.
keep drinking the kool-aid
You must think Steve Jobs has spent the last few years working at Apple, when he probably should have been doing something less stressful, because he wants yet another billion dollars?