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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

#221

Post by emmett »

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…

Grants are always subject to board approval, due to corporate structure of literally every startup I've ever heard of. It's a rubber-stamp process (for normal-sized grants, anyway) and employees always get the options.

Similarly, they can't specify the strike price because for legal reasons the strike price is set when the options are issued.

Nonetheless, options of this kind are worth a potentially huge amount of money. X00,000s of google shares, given to you subject to board approval and with an unknown strike price, would have been fabulously valuable.

However, perfectly legitimate questions:

How many outstanding shares of stock do you have on a fully-diluted basis? X00,000s of stock options is meaningless, only percentages matter. You should always ask this question.

What was the last 409a valuation for common stock? When did you get your last 409a valuation? This will determine the strike price your options get, assuming that their 409a valuation is less than a year old.

So actually, their answers were perfectly legitimate. $35k under market is quite a bit, though depending on the percentage of the company you were getting it might be fair.

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

#222

Post by [deleted] »

emmett wrote: post #221
kevinskii wrote: post #142

Earlier quoted context omitted.

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…

Grants are always subject to board approval, due to corporate structure of literally every startup I've ever heard of. It's a rubber-stamp process (for normal-sized grants, anyway) and employees always get the options. Similarly, they can't specify the strike price because for legal reasons the strike price is set when the options are issued. Nonetheless, options of this kind are worth a potentially huge amount of mo…

[deleted]

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

#223

Post by [deleted] »

emmett wrote: post #221
kevinskii wrote: post #142

Earlier quoted context omitted.

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…

Grants are always subject to board approval, due to corporate structure of literally every startup I've ever heard of. It's a rubber-stamp process (for normal-sized grants, anyway) and employees always get the options. Similarly, they can't specify the strike price because for legal reasons the strike price is set when the options are issued. Nonetheless, options of this kind are worth a potentially huge amount of mo…

[deleted]

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

#224

Post by kevinskii »

emmett wrote: post #221
kevinskii wrote: post #142

Earlier quoted context omitted.

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…

Grants are always subject to board approval, due to corporate structure of literally every startup I've ever heard of. It's a rubber-stamp process (for normal-sized grants, anyway) and employees always get the options. Similarly, they can't specify the strike price because for legal reasons the strike price is set when the options are issued. Nonetheless, options of this kind are worth a potentially huge amount of mo…

> Grants are always subject to board approval...and employees always get the options.

My sibling comment offers a counterexample [1].

> X00,000s of stock options is meaningless, only percentages matter. You should always ask this question.

Exactly right. They weren't willing to answer this question in writing.

> Similarly, they can't specify the strike price because for legal reasons the strike price is set when the options are issued.

I believe it's legal to set the strike price at X percent of the stock price, which seems to be what you'd really need to try to valuate private company stock options anyway.

[1] http://news.ycombinator.com/item?id=5258483

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

#225

Post by drusenko »

confluence wrote: post #214
drusenko wrote: post #190

Earlier quoted context omitted.

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…

1. VC portfolio exits. 2. Dilution, liquidation preferences and different stock class rights do indeed push it towards zero. 3. No I'm not. I'm merely indicating that valuations are bogus. 6. Implicit force is still force - just because you haven't mandated it doesn't mean it's not enforced via threat of firing and peer pressure dynamics.

Since there's a lot of assertion and not much data here, let's bring some in. After some quick research, this Quora article seemed to have some useful statistics: http://www.quora.com/What-is-the-truth-behind-9-out-of-10-st...

In short, 13% of VC-backed startups exit for over $10M, 5% exit for over $50M, and 2% exit for over $100M, which is what I'd call a meaningful exit for all parties involved.

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

#226

Post by drusenko »

baak wrote: post #217
drusenko wrote: post #192

Earlier quoted context omitted.

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

1 in 50 seems... very, very optimistic. On top of that, the investment is higher than the lottery. The lottery costs you $1. This costs you ~$10-20k in salary, and possibly more in lost opportunities and time you would've had elsewhere.

Not at all. From my comment above:

----

Since there's a lot of assertion and not much data here, let's bring some in. After some quick research, this Quora article seemed to have some useful statistics: http://www.quora.com/What-is-the-truth-behind-9-out-of-10-st...

In short, 13% of VC-backed startups exit for over $10M, 5% exit for over $50M, and 2% exit for over $100M, which is what I'd call significant.

----

Besides, there are a lot of startup opportunities that pay market, so you aren't "investing" anything in the equity, it's a bonus over what you'd get paid elsewhere.

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

#227

Post by MichaelApproved »

flyinRyan wrote: post #175
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…

>If you don't like these deals, then don't use When all your competitors are? Go make a business and try that strategy. >50% off a meal is a great offer! So great the company who set it up went right out of business despite an insane amount of funding. >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 meal, instead of the f…

My points about not using the deals and them being great offers was from the point of view of a customer.

"I don't think people should tip at all. Tipping is just a sneaky way of having the customers pay the labor costs directly. It's ridiculous to say a steak costs $7 when I'm paying the the server as well."

Not wanting to tip and actually not tipping are two different things.

I agree with you that the whole tipping concept can get ridiculous but like it or not, that's the system we have.

To not tip in all cases, in a system that has tipping as a critical part of the labor costs, is flat out wrong. You know the system is based on tipping and you're punishing the wrong person for your distaste for it.

If you don't want to tip, don't participate in the entire system. Don't go to any restaurants or other place of business that advocates tipping and makes it a critical part of the staffs salary.

Again, it's absolutely wrong to not participate in only one aspect of the system you dislike when the people who get hurt are the ones with little power to change things.

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

#228

Post by mehrzad »

pshin45 wrote: post #34
mehrzad wrote: post #18

Earlier quoted context omitted.

>are antithetical to human progress. This can be said of many startups, and this fact is causing a reactionary feeling toward the Valley in many tech/neckbeard circles.

Agree, technology for the sake of technology and growth for the sake of growth does not a business (or social good) make. I love so much of what YC does but I wish their motto was not "Make something people want " but rather "Make something people need " because the two can often be diametrically opposed. Kinda like how a parent should not always give their child everything he/she wants (candy at every meal, constant…

If tech were really like that, maybe Tent and Spideroak would be more popular. If only.

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

#229

Post by karoramj23 »

prostoalex wrote: post #110
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…

What marketing venue currently works for you and your competitors as far as new customer acquisition?

This is a tough question. To be completely honest, none of them are amazing. Opentable does a good job of telling us which guests are first-time diners, but I still have no way of knowing if they would have come in whether OT existed or not.

The biggest problem that a lot of restaurants face is that we simply don't know which marketing tactics are working. The only thing we see is if total revenue goes up or down. This causes us to just throw everything at the wall and guess what sticks based on revenue changes.

To some extent coupons work because we can simply track how many are redeemed, but like I mentioned in my original post, this cheapens the product often and causes the guest to perceive that the food is worth less than the normal price.

With that said, there is no homerun (at least that I know of) customer acquisition method as of right now.

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

#230

Post by snowwrestler »

confluence wrote: post #160
temphn wrote: post #159

Earlier quoted context omitted.

Honest question: do you believe there any job where you are not being screwed? And do you believe you are an above average employee, or that you could be a founder yourself (as it's just like getting in on Manhattan early)? If so, why not work in that job (rather than at a startup)? Or why not found a startup (rather than be an employee)?

Any job with monopoly pricing protections - a doctor or engineer at large established firms fit the bill. Once you have monopoly pricing - you are no longer the one being screwed, but rather the one doing the screwing. Do I think I'm above average? Depends on what you mean by average. There are zero barriers to entry in becoming a founder - so yes I'm founder material. As is everyone else. The question that actually…

I know several doctors and they all complain about how they are getting screwed--by the trial lawyers, the insurance companies, the hospital, the government, etc.

This may just be a situation where the grass looks greener.

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