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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

#181

Post by danielweber »

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…

If you don't have a seat in the board room, your equity can disappear in an instant.

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

#182

Post by ap22213 »

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

Well, they have a hip looking office space near the Whitehouse, in downtown DC.

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

#183

Post by [deleted] »

petenixey wrote: post #151
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…

Well articulated, David. I also implore anyone reading this to use common sense and a huge risk-discount when evaluating the value of stock. As an employee the primary thing you should worry about is not whether the company is going to be 100x or 1000x return, it's whether it's going to succeed at all and you are far better equipped to do this than you realise. An investor's job is to catch the winners. An employee's…

[deleted]

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

#184

Post by imjk »

doktrin wrote: post #72

> But despite our Current Liabilities being high, they at least are not as frightening as Groupon's Merchant Payables gap, as Groupon pays out usually in 1/3rds (30 days, 60 days, then 90 days), while at LivingSocial, we usually pay 80% of the total daily deal's sales to a merchant within 10 days of the offer ending, and then we owe them the other 20% months later. So yes we owe local merchants a lot of money, more t…

I agree. You could even argue from a business perspective that Groupon's making a wiser business decision by using the time value of money more in its favor.

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

#185

Post by Duhck »

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…

While I agree with a few things here, I also agree you are very much a cynic (and that can be good).

I too am a cynic, but I also believe that the startup culture we have created has many more benefits than you seem to weigh in on.

I don't work at a startup to get rich, I work at a startup to figure out what I did wrong with my own business(es) in the past. I joined each of the companies I have worked at in the past 3+ years to learn and love my job... big emphasis on these two ideals.

I want to better myself, I want to see how other people succeed and fail, I want to see how I deal with failure without risking my own investment(s) like I have in the past.

I think -- I hope -- that other people in the scene feel the same way.

This is a learning experience, and so far I have learned that this approach to raising massive amounts of money for an inevitably doomed business is totally fucking flawed.

I will start a business within the next year, and like my previous business(es) I will do it with my own money, it will be cashflow positive at launch, and it will succeed because I will not make the same mistakes as others before me.

I only know this because I have joined startups that have failed miserably, as I sat and watched the management teams, and board members struggle to cooperate.

I hope others see this as the same opportunity. This is a chance for us to learn how to be better business people, engineers, and designers without taking the burden of risk.

Sure we will work hard, we will also play hard, and hopefully love our jobs. Some of us will move on to start a business of our own, and with the knowledge we gained from these experience, we get our value out of it. Its not the equity, or compensation, its learning.

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

#187

Post by drusenko »

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?

my general rule of thumb is: founder is someone who starts before salaries, employee is someone who is paid a near-market salary on day 1.

the risks of starting before salaries are that you will accumulate a ton of debt (or waste away your savings, or both) for a project that ends up going bust. you will lose many friendships, perhaps even your marriage, because you believe so strongly in an idea that ultimately may or may not work out, and you put 100% of your available time and effort into it.

there's nothing particularly glamorous about that statement i just made. starting a company is hard and it sucks and it usually ends in failure with the founders hating each other.

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

#188

Post by jbooth »

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.

Drug dealers? Pirates? Hell, the somali pirates even have an investment system now.

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

#189

Post by drusenko »

doktrin wrote: post #134
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. 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. A more accurate statement would be "...is not a good universally -applicable rule...". To add some numbers to the discussion, there are currently 203 startups listed on Angel List as hir…

I would be surprised if even 25% of those startups had a meaningful exit. But even at 25%, we're a very long way from the lottery odds -- that comparison always strikes me as quite misleading.

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

#190

Post by drusenko »

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…

1. Source please?

2. It all depends on what your failure rate is. It'd have to be astronomically high to truly "approach zero".

3. You're acting as if somehow VCs putting in millions of dollars are doing it for the express purpose of creating a fake valuation to screw employees. This is a spectacularly self-centered point of view.

The reality is that what you call "valuation leverage" doesn't matter. The valuation set just determines what % of the company the investor owns and if they can make a return if someone else decides that the company is worth more than that or if the company goes public.

The valuation of an investment round is actually fairly meaningless if you really think about it. The only one that really matters is a sale or IPO.

Besides, you could say the same thing about valuation leverage with an IPO. It's rare for 100% of a company to be traded, that doesn't mean that each independent party isn't acting in their own rational best interest by trying to accurately place a value on the company.

5. There are certainly counter-examples, I won't deny that.

6. I've had this discussion here a million times before and I don't want to have it again. We're not EA, we're not forcing anybody to do anything, and I wager our average work week is 45 hours. But suffice to say, if you never want to work a minute over 40 hours, then don't. Nobody is forcing you to take the job, make your intentions clear when you interview.

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