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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

#191

Post by jrs235 »

MichaelApproved wrote: post #147
jarek wrote: post #144

Earlier quoted context omitted.

> 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 r…

Unfortunately this is true. Most people [in the US] don't tip on the amount of a coupon and sometimes even gift cards.

I'm sure when waiter's see my wife and I with three little ones come in their heart sinks a little thinking they're going to get a bad tip. Especially when we split a plate for ourselves and/or our children. However, when the bill comes I tip around 25% of the bill and then add approx. $5 per split dish [when the restaurant doesn't already have a charge for doing such] when means they come out with a very nice tip percentage wise. ($5 is often less than a dish so I still save money, and a $5 tip would be 20% of $20 so the waiter is still tipped for putting up with my family and bringing out an extra plate.)

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

#192

Post by drusenko »

acheron wrote: post #165
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." 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…

We're talking maybe 1 in 50 versus 1 in 175,000,000 so yes, the comparison to the lottery is useless.

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

#193

Post by fiatmoney »

btilly wrote: post #36
timdorr wrote: post #10

Earlier quoted context omitted.

Do you think Daily Deals are a fundamentally flawed concept? I tend to think there's nothing wrong with them other than an over-saturation of the market and a prevailing attitude that says all you need is a sufficiently large mailing list to win. But that's just my outsider's view.

They are flawed unless you can do something about retention. Has anyone tried the concept where the "deal" is that you go, name the site, and get a coupon giving you a deep discount the SECOND time you go back to that store? That would seem to make more sense. Because everyone that the store gives the deal to, has actually paid full price once. And wanted to go back. And if you've been twice, you're more likely to go…

Or unless you have an airline cost structure, with near-zero marginal cost. Haircuts, lawncare, beauty services, hotel stays, etc. are their bread and butter.

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

#194

Post by potatolicious »

drusenko wrote: post #190
confluence wrote: post #139

Earlier quoted context omitted.

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 se…

> "It'd have to be astronomically high to truly "approach zero"."

No, it doesn't. A low failure rate can still work out to an EV of near-zero for the employee. You're disregarding powerful effects:

- dilution between grant and exit

- amount of equity being offered in the first place

- opportunity cost of passing up traditional cash/stock bonus structures at BigCos

The fact of the matter is, a meaningful exit for the founders is almost always an insubstantial exit for the employee. Owning 20% of a company is very different than owning 0.05% of a company, post-dilution through additional rounds of financing.

The culprits here aren't VCs. The VCs are putting in the money the company needs to do its thing. Valuation isn't the problem - the attitudes of founders is. I've found that founders mentally grossly overestimate the value of the equity they're handing out. I've seen people demand 5-figure pay cuts for 0.1%-level equity, and this isn't uncommon.

The amount of equity being handed around by founders, even to early employees, is not high enough for anyone to seriously consider taking a pay cut.

If you want me to take a pay cut, give me an amount of equity that might actually result in a meaningful exit. Of course, at the current salary/comp level of competent engineers, we're talking >1% levels of equity, and no founder is willing to part with that.

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

#195

Post by alphadogg »

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…

My only problem is #4. Might need clarification. Lots of (if not all) startups will have a negative long-term effect on some incumbent party.

Could you give an example of a startup that has had no negative effects on any company or industry?

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

#196

Post by darkarmani »

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…

> This is not true. The reason earlier employees receive more stock than later employees is that everyone is receiving the same dollar amount, but how much stock you get for that dollar amount changes. To keep it simple, if you are employee #1 and you get $100k of stock at a company valued at $10M, you get 1% of the company. Later, if you get $100k of stock valued at $100M, you get .1%, etc.

> This makes a whole lot of sense: first, the company was super speculative and full of risk when the earliest employees joined. Then, their efforts directly contributed to the company being (much) more valuable. This was not a guaranteed process, they took on a lot of risk (things could have gone miserably south). They are rewarded for that risk when the company grows.

If they are giving the same value of stock, isn't that less reward for the risk? I would hope that risk plays into the value of stock granted by employees (ie: 100k and then 50k grants).

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

#198

Post by darkarmani »

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…

Even better: A year or two goes by and the Controller and CFO ignore your emails trying to get a strike price and paperwork to exercise your options. cough Perimeter or whatever your name is now: https://www.silversky.com/ cough

Add that to the list of ways to get denied your options. How do you exercise if they just ignore you?

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

#200

Post by jamieb »

drusenko wrote: post #190
confluence wrote: post #139

Earlier quoted context omitted.

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 se…

I have worked at three startups where I joined at <10 employees. Best result was stock-options worth less than the price. Worst was they owed me a paycheck. I had fun, and we had a good chance of making it big with all of them. I like to think that if I'd been offered the chance to join Google at <10 that I'd have been wise enough to spot the potential value of the company and take more stock. Unfortunately: a) I was not asked and b) I probably would not have had that wisdom. However, if I had been asked, but had not taken more stock, I'd still be a millionaire, just not a billionaire.
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