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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

#161

Post by guy_c »

ma2rten wrote: post #62
taf2 wrote: post #26

This is absolutely terrible news. I don't care if you "like the daily deals business model" or "hate the daily deals business model" - this is very very bad news for a lot of people. It will have impact on the rest of the industry and perhaps already has. We should be very disappointed that things have gone south in this way. We should work harder to build profit into our businesses and we should hope still that Livi…

Maybe I am being too insensitive, but ... I think that if the valuation for companies, which have been overvalued corrects itself, that is ultimately a good thing for the industry and society at large. It means that resources are being freed up to work on more valuable things. It is also another case study from which this young industry can learn. As for the employee and investors, they have taken a deliberate bet on…

I like your perspective on this. It is impossible to see the 'damage' done by capital applied (or over applied) to the wrong thing. So people don't really think about it. What great things were NOT created by the great people LivingSocial hired.

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

#162

Post by Gmo »

don_draper wrote: post #153
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…

There's truth to these word, but it is also true that working for a big corporation can be soul crushing experience.

Guess what, there are plenty of companies that are neither startups nor big co. :)

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

#163

Post by louischatriot »

colmvp wrote: post #145
louischatriot wrote: post #126

Earlier quoted context omitted.

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?

There is no general answer to this one, but I'd say those 6-12 first months are when the company is most derisked. If you're going to be employee #1 of a 12-months-old startup, it means it still exists (vs all those failed projects), so it is much less risky, and founders are compensated for this risk (don't forget that in most case, their huge share of equity will be worth nothing in a few years!).

Of course once employee #1 joins he usually works as hard as the founders and I understand if he wonders why he got so little equity but those first months are more crucial than appears.

Let's take the example of the company I'm cofounding (tldr.io). When we started 10 months ago it was nothing more than a crazy idea with a very low chance of success (summarizing the web). Fast forward to today. We're still not ready to hire but we're getting close. The crazy idea has become a "there actually is a chance, although small, that it will succeed". I feel that the difference is huge.

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

#164

Post by dunk010 »

kanzure wrote: post #123
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…

> You seem to be saying to contradictory things: No, they are not contradictory statements. Equity is one way to see upside in a startup, but that upside can be completely destroyed for employees. For example, common stock or when founders don't negotiate with investors on your behalf. An employee's relationship with equity can be very different from a founder's relationship with equity (and not just quantity). Situa…

Very true. Options pool != stock the founders have. There are often many classes. It's never simple.

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

#165

Post by acheron »

drusenko wrote: post #120
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…

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. Take the least amount of stock possible is not a good generally-applicable rule. It might have worked for you in the past, but it sure wouldn't have worked well for any of the employees of Google, Facebook, Dropbox, Weebly, etc."

And for the people who won the Powerball, "Don't buy lottery tickets" wouldn't have worked well for them. That doesn't mean "Don't buy lottery tickets" isn't a good generally-applicable rule.

Cashing out big on your startup might not be quite as rare as winning the Powerball, but it's still awfully unlikely.

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

#166

Post by lmm »

chii wrote: post #125
irollboozers wrote: post #46

Earlier quoted context omitted.

I disagree, it is will within the scope of HN especially if we're to prevent this sort of thing happening again from a founder/person on the ground level. The other guy is wrong, good and human progress can be paired well with technology and business solutions. It's called social venture, and it's possible. It's just not what the valley focuses on.

you can take the view that Good means profitable. thus if your business generate a profit you have done good. of course this is only true if the market is free.

Of course by that definition LivingSocial didn't do a lot of good.

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

#167

Post by maerek »

colmvp wrote: post #145
louischatriot wrote: post #126

Earlier quoted context omitted.

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?

Better question here - who are you to judge this? A prospective employee is by no means forced to accept employment with a start-up where they're receiving a smaller share of equity than the founders. There is no grounds for any sort of argument of what is "fair" when you are on the receiving end of a job offer. If it's not fair, don't sign on. If you don't like the terms of the deal, renegotiate or find another one. The founders / current employees can offer whatever they would like - you have the ability to decide whether or not you want to accept those terms.

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

#168

Post by steveklabnik »

schiang wrote: post #112
karoramj23 wrote: post #60

As an independent restaurant owner, I can't say I didn't expect to see this one day. The model simply doesn't work, at least in our industry. The restaurant loses money on every single "daily deal" that is redeemed. With LivingSocial or (insert any other daily deal site here) taking half of the deal, the restaurant is simply left with 25% of the revenue generated. This does not even cover our food costs, let alone la…

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…

> If they didn't like people using the deals, why bother signing up for it?

Employees aren't the ones signing up, their bosses are.

Also, it's pretty common for people to not tip when they get something for free: I never get stiffer drinks than when I tip the bartender at an open bar. First drink is like water, second is always pure alcohol.

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

#169

Post by jasonlotito »

colmvp wrote: post #56

$110 million seems like a drop in the bucket if they really are bleeding money and have 4000+ employees, many of whom are probably very upset at the evaporation of their stock options.

FTA: Sources said LivingSocial's Board made clear this was the final lifeline, that the company must break even by the end of the year including closing dozens of unprofitable offices and laying off thousands of employees

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

#170

Post by maxerickson »

cpeterso wrote: post #133
btilly wrote: post #80

Earlier quoted context omitted.

The coupons that you're talking about are for specific products. The idea being that you come in to get that price on one thing, and wind up picking up others at full price.

Some stores offer coupons for your next purchase. For example, Gap gave me coupon for 20% off any one item if I complete their online survey. That's a pretty big discount, so that survey information must be pretty valuable.

I think that they don't expect you to come back for just 1 item. So I would guess that they value the engagement and increased chance of a trip to a store.

I don't know their margins, but I doubt a 20% discount has them losing much on that item.

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