VC Decries Airbnb’s Recent Funding for Founder Control and Cashout • Hacker News Board

Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#131

Post by keeptrying » Sun, Oct 02, 2011, 2:54 PM UTC

keeptrying wrote: post #61

vladd wrote: post #47

Earlier quoted context omitted.

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…

Your "little guy" has been earning a salary for the last 3 years in the startup - in fact he makes more money than the founders. I still think its okay to compensate the founder for getting the app to this point.

Just to be clear, I'm not talking about the final exit. I'm talking about an award to the founders if they can get the company to a billion dollar valuation. That's all I'm talking about. And not Fu money but something of the order of 1million which would give the entrepreneur a small nest egg for having gotten this far but doesn't really make him financially secure. And I agree that shafting employees is reprehensible and downright despicable.

Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#132

Post by sunir » Sun, Oct 02, 2011, 3:19 PM UTC

ssx wrote: post #124

gojomo wrote: post #73

Earlier quoted context omitted.

If the founders retain a majority, this is less than 4% of their stake — that percentage is more relevant in analyzing the confidence signalling and motivations than a superficially large "$21 million" figure.

Clearly you still don't understand. They didn't sell 4% of their stake. If they did that, it would be somewhat reasonable. What they got was a dividend. In other words a bonus. And yes the figure is still "large" because it is 1/6th of their funding that goes to their pockets, rather than the company.

It would be completely reasonable if they sold equity to take money from the round.

Alternatively they could offer a retention bonus to everyone based on current salary.

Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#133

Post by NY_Entrepreneur » Sun, Oct 02, 2011, 3:42 PM UTC

Ah, what a morality play -- secrecy, power, greed, collusion, dirty dealing, guilt, shame, etc.!

If HN can't outgrow the fascination with morality plays, then what hope is there for the rest of society and society as a whole?

We need a new Web site: VC_secret_confessions.com!

Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#134

Post by gruseom » Sun, Oct 02, 2011, 4:26 PM UTC

wisty wrote: post #118

garry wrote: post #81

Earlier quoted context omitted.

I was early at Palantir (employee #10). Trust me, the founders assumed way more risk than I did when I joined. I didn't even quite understand that fact until I myself started a company. If you know the Airbnb story, you'll know these guys worked their asses off on an idea nobody else believed in. As legend would have it, Joe had a binder of credit cards the way kids would have binders of baseball cards. Think about t…

So, he was risking other people's money, hoping he would be able to reward himself for taking those risks? Sounds like great CEO material. Using multiple credit cards to fund a risky investment is irresponsible.

That is the pettiest comment I've seen in a while. No one could make it who respects entrepreneurs - or who knows what it means to sweat blood while trying to bring something of value into the world.

Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#135

Post by gruseom » Sun, Oct 02, 2011, 4:30 PM UTC

cletus wrote: post #72

Absolutely 100% agree. Founders cashing out is a big red flag. I said it about Groupon. I've said it before. This really is taking it to the next level: cashing out with a dividend to retain control and ownership. I absolutely agree that for any cash out it should be open way beyond the founders. In fact, this is a good way for larger startups to kick the 500-shareholder limit can just a bit further down the street.…

You start with "founders cashing out" and end with the woman who had her apartment wrecked? What is common here, other than that you don't like Airbnb?

Reminds me of Freud's story about the peasant who says to the other peasant "Hey, you broke my pot" and the other says "First, I didn't borrow your pot, second, it was broken when you lent it to me, third, it's my pot."

Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#136

Post by jroseattle » Sun, Oct 02, 2011, 4:51 PM UTC

philwelch wrote: post #106

jroseattle wrote: post #74

Earlier quoted context omitted.

Try using that as your sales pitch for hiring the "little guy" in this market and let us know how far you get.

Are prospective startup employees really motivated by stock options? There's no shortage of HN posts that actually work out the math and conclude that you won't get rich from employee stock unless the startup succeeds on the scale of Google, Amazon, or Microsoft.

Based on the number of times I've been offered stock options as a benefit of joining a startup, I'd say it's very prominent in startup culture as a motivator and recruitment tool.

If it doesn't hold value (as it seems you're positing), then early employees are getting played in the worst way. They're the ones who are getting screwed.

The context of what most people are saying is that founders are now getting their pound of flesh from VCs/investors (summary of other comments, not this thread.) The tone of those comments is that founders are simply putting steps in place to ensure they don't get screwed.

If this is the case (I don't know how true it is) then the marker for who gets hosed lands squarely on those early employees, and THAT will be a gigantic problem for startups. If early employees begin to distrust founders and investors, it's not just a headwind -- it's pretty much game over. Early employees are quite often the difference between success & failure. Those top-flight team members you need to execute on that idea will use the only leverage they have in that relationship -- they simply won't join the startup.

I hope AirBnB is an anomaly, but I expect this type of scenario to happen more and more. As for founders wanting to put themselves in position to do this -- who could blame them? But, it's not without consequence and their reputation as startup founders will be summarily tested with any future ventures.

The smartest startups will very quickly learn that success will only come when all parts are working together, doing their jobs -- founders, investors, early employees.

Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#137

Post by keeptrying » Sun, Oct 02, 2011, 5:04 PM UTC

wnight wrote: post #117

keeptrying wrote: post #65

Earlier quoted context omitted.

But the employees are getting salary and have been for the last 3-4 years. Infact all those employees have been making more than the founders for the last 3-4 years. And if on joining, you were told about 2 classes of stocks - one for the founders and one for the employees then you should have understood that this was a distinct possibility. This VC is just using this small soapbox to warn Airbnb not to eff with him.…

> if on joining, you were told about 2 classes of stocks [...] If there is ever a second class of stock, and it is yours, it is worthless.

Well google had separate founders stock.

Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#138

Post by keeptrying » Sun, Oct 02, 2011, 5:06 PM UTC

keeptrying wrote: post #61

vladd wrote: post #47

Earlier quoted context omitted.

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…

Your "little guy" has been earning a salary for the last 3 years in the startup - in fact he makes more money than the founders. I still think its okay to compensate the founder for getting the app to this point.

Just to be clear I dont think giving FU money to the founders and nothing to the employees is fair. But something of the order of 500K to 1million for the founder I think is fair. Ie a small nest egg but not nearly enough to be financially secure.

The founder in all ways owes his company to the employees and everyone who has helped him and any big upside MUST be shared.

Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#139

Post by philwelch » Sun, Oct 02, 2011, 6:50 PM UTC

jroseattle wrote: post #136

philwelch wrote: post #106

Earlier quoted context omitted.

Are prospective startup employees really motivated by stock options? There's no shortage of HN posts that actually work out the math and conclude that you won't get rich from employee stock unless the startup succeeds on the scale of Google, Amazon, or Microsoft.

Based on the number of times I've been offered stock options as a benefit of joining a startup, I'd say it's very prominent in startup culture as a motivator and recruitment tool. If it doesn't hold value (as it seems you're positing), then early employees are getting played in the worst way. They're the ones who are getting screwed. The context of what most people are saying is that founders are now getting their po…

There is a rational case for joining a startup as an early employee, especially if the startup is funded. It's likely to be less soul-crushing than working for a big company, you're going to earn a salary (perhaps even a market salary) and you're going to gain experience towards founding your own startup in the future.

Stock options are a less significant part of the equation--they aren't worth anything unless there's an exit, and if there's an exit they still probably aren't worth especially much unless it's an extremely outsized exit, the once-in-a-decade type like Google, Amazon, or Microsoft. They're probably still worthwhile, but it's not prudent for an early employee to expect too much from them.

Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#140

Post by philwelch » Sun, Oct 02, 2011, 7:13 PM UTC

trevelyan wrote: post #69

jack7890 wrote: post #36

Earlier quoted context omitted.

No, that money doesn't go directly into the partners' pockets. It also goes to pay the VC firm's rent, travel cost, salaries of associates and support staff, legal/accounting costs associated with the deal, and a bunch of other things. It is generally accepted that a vast majority of a VC partner's income comes from their share of the fund's return, not from the management fee. It is not unheard of for a VC firm's co…

Honestly, why should anyone here care that the VC has to pay rent or salary expenses? Are they eating ramen or living in the office? As a founder, I'm delighted the AirBNB guys are charging for admission to their equity sale. Call the payout back wages paid at market rates and call it a day. And if investors are reacting in shock to the sticker price they can get out of the showroom. Sorry you won't be joining us - p…

At 20 million dollars, that would be a rather significant premium above market rates.