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LivingSocial: Employees' and Founders' Common Stock Now Worthless

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Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#141

Post by snogglethorpe »

bitcartel wrote: post #75
teej wrote: post #43

Over 5 years ago I turned down an offer to work at LivingSocial. Last year, I would've been worth $10 million on paper. All of that fake wealth evaporated today. What a mess.

Wow, LivingSocial has now been funded to the tune of $918 million, and really, what is there to show for it? http://www.crunchbase.com/company/livingsocial

What seems sort of a shame is that at least at one point, their actual software seemed pretty nice ... I used their facebooks apps for a while and I enjoyed them.

There were also plenty of bugs and "issues", etc, however, and after a while it became clear they were overwhelmed or something, and things just kept getting worse. The feeling that I was putting lots of personal data into a database that seemed likely to implode at some point was obviously a big turnoff, and I lost interest.

But if they had been on top of things, it might have turned into something pretty cool (I guess you can say that about most startups though!)...

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#142

Post by kevinskii »

emmett wrote: post #114
confluence wrote: post #55

Here are a few tips for others startup employees: 1. Take the least amount of stock possible - your startup is statistically unlikely to succeed. It'd be better to bump your salary up $10-20K than to get the stock. 2. Unless it's liquid - it's worthless. 3. Valuations pre-cashflow - are useless. Anybody can value anything at insane levels using just one dollar. I value HN at $1 billion by offering to buy only 1 share…

You seem to be saying to contradictory things: "Equity is worthless, never work for equity, always demand cash up front." "Those darn investors and founders keep all the equity for themselves and get rich off your back!" You can't have it both ways. Either the equity is worthless or it isn't. Are the investors, who get no salary and only equity, even bigger suckers than the employees? What about the founders who usua…

There's equity, and then there's "equity."

For example, a well-funded late stage startup recently offered me a salary that was $35k/year below the market rate, plus X hundred thousand stock options. These came with no strike price, and their grant was subject to final board approval after hiring. When I asked how I might possibly valuate these at anything other than zero dollars, they told me that this was just a standard bay area offer structure. When I persisted, they reminded me of the free lunches. When that wasn't convincing, they fell back on the old, "People don't work here for the money, they do because they want to change the world! You may just want to get rich, but we'll be happy if we can cure cancer someday."

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#143

Post by robryan »

The part where group deals fall down is the big margin that the sites are taking, this is the difference between a deal being a break even or loss leader and putting the business offering the deal in a big financial hole.

These margins are required to pay for a large sales team to convince businesses that they need to run these deals.

I think a more sustainable model is one closer to traditional affiliates marketing or self serve advertising. Where the deals site provides a platform that is largely self service and takes say a 5% cut rather than 50%.

This does loose one of the original ideals of group deals, that there was only 1 for an area (or at least a small amount each day) so each business running a deal was able to get a ton of exposure.

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#144

Post by jarek »

MichaelApproved wrote: post #121
schiang wrote: post #112

Earlier quoted context omitted.

I really hate using LivingSocial/Groupon because it seems like the business owners always HATED taking these deals. I always feel like I'm being treated differently because I'm not paying the actual price. One time when I used one of these deals, I even heard the employee say to another employee "... another #$#@$#@ groupon deal....". If they didn't like people using the deals, why bother signing up for it? I can't w…

"I can't wait for these daily deal business to go away because I don't think it benefits anyone." If you don't like these deals, then don't use them but don't say that they don't benefit anyone. Customers benefit from these deals all the time. 50% off a meal is a great offer! I think the biggest problem with these deals (for the wait staff at a restaurant) is that people think they should tip based off the discounted…

> It's a deal on the meal, not a deal on the tip.

The tip is obviously dependent on the price of the meal: most people will tip more for a more expensive meal, usually following a ratio. (20% or what have you.) People ordering the more expensive meal on the menu by and large tip more than those ordering the least expensive meal. Why should this change for the groupon meal?

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#145

Post by colmvp »

louischatriot wrote: post #126
confluence wrote: post #55

Here are a few tips for others startup employees: 1. Take the least amount of stock possible - your startup is statistically unlikely to succeed. It'd be better to bump your salary up $10-20K than to get the stock. 2. Unless it's liquid - it's worthless. 3. Valuations pre-cashflow - are useless. Anybody can value anything at insane levels using just one dollar. I value HN at $1 billion by offering to buy only 1 share…

Only someone who hasn't tried to start a company could say that founders and investors don't deserve to have most of the equity. Try to start one and give all employees the same equity you own ... Some points you make are valid though, it's a shame you are so single-minded.

I don't think anyone could argue that employees deserve the same equity as founders.

But what's really the difference between the first few employees and a founder? This is especially true for employees who are ridiculously crucial to the early success of a project when the value of the equity is non-existent. Is being part of a company 6-12 months earlier truly worth 10x-20x more than the next person?

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#146

Post by nemesisj »

I think one thing to remember when joining a company, particularly one of the higher profile startups that raise huge sums of money is that values really matter.

Not mission statement values, but the actions that are consistently taken on a daily basis.

Is your startup or employer profitable? No? Then why are they spending money on nice offices and expensive dinners and so on? I can almost guarantee that LivingSocial could have done with less than the 800 million it raised had they valued frugality and breaking even more than being some giant media darling worth-a-billion company. Deficit spending can work longterm for governments, but not for companies or individuals.

It's a real shame everyone got cleaned out, but they had to know this was going to happen at some point.

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#147

Post by MichaelApproved »

jarek wrote: post #144
MichaelApproved wrote: post #121

Earlier quoted context omitted.

"I can't wait for these daily deal business to go away because I don't think it benefits anyone." If you don't like these deals, then don't use them but don't say that they don't benefit anyone. Customers benefit from these deals all the time. 50% off a meal is a great offer! I think the biggest problem with these deals (for the wait staff at a restaurant) is that people think they should tip based off the discounted…

> It's a deal on the meal, not a deal on the tip. The tip is obviously dependent on the price of the meal: most people will tip more for a more expensive meal, usually following a ratio. (20% or what have you.) People ordering the more expensive meal on the menu by and large tip more than those ordering the least expensive meal. Why should this change for the groupon meal?

Because when you get the bill, it's reduced from the retail price. People tend to tip on the price in the final bill. That final bill is discounted and they base their tip calculations on the discounted price, not the retail price. Even if they mean to tip %20, that %20 is based off a reduced number so the waiter is not getting tipped on the full meal price.

When I tip on a discounted meal, I calculate based on the retail price. My original comment suggested that many people might be tipping on the discounted price and that could be why waiters don't like daily deal customers.

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#148

Post by confluence »

kevinskii wrote: post #142
emmett wrote: post #114

Earlier quoted context omitted.

You seem to be saying to contradictory things: "Equity is worthless, never work for equity, always demand cash up front." "Those darn investors and founders keep all the equity for themselves and get rich off your back!" You can't have it both ways. Either the equity is worthless or it isn't. Are the investors, who get no salary and only equity, even bigger suckers than the employees? What about the founders who usua…

There's equity, and then there's "equity." For example, a well-funded late stage startup recently offered me a salary that was $35k/year below the market rate, plus X hundred thousand stock options. These came with no strike price, and their grant was subject to final board approval after hiring. When I asked how I might possibly valuate these at anything other than zero dollars, they told me that this was just a sta…

I've got a term for what you just experienced: psychological arbitrage.

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#149

Post by vecter »

confluence wrote: post #139
drusenko wrote: post #120

Earlier quoted context omitted.

It's unfair to characterize all startups as nirvana, and it's likewise unfair to label them all as run by evil masterminds taking advantage of their employees. Sure, some startups are total shit, others are actually pretty enjoyable places to work. So let's not paint this as either black or white. You make some great points that a lot of "wide eyed" grads could use to hear more of. There are also a few things I take…

1. Yes it is. Startup failure rates are really that high. 2. No one knows these odds or who will actually succeed - it's the reason why being a VC is so random. Furthermore - failure rates still push the EV towards zero. 3. The difference between say $3 million at a $15 million valuation post money and my example aren't really that different. Valuation leverage is a huge issue that no one seems to talk about. 5. You…

6. I'm not sure where you're getting these numbers from. You talk in black in white and categorically (and quite unfairly) paint startups as slave labor camps where employees are treated like shit and exploited at every possible opportunity. I know a lot of people both founding and working for startups, and I've never actually heard of employees being asked or even implicitly pressured to work 100+ hour weeks. That's not to say that it never happens, but from the pretty large sample I have, I've personally never heard of it. That seems to pretty much contradict your statement outright, given that it's so extreme and broad.

Dave phrased his answer in very reasonable terms that, based on my experience, closely match reality. You just flat out ignored them and went back to your original claim as if his points simply had no merit.

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#150

Post by petercooper »

larrywright wrote: post #3

This isn't terribly surprising, they've been losing engineering talent left and right. It was pretty easy to infer that they were in trouble.

To be fair though, I know that you (and I!) follow more Rubyists than the average HN reader or analyst ;-)
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