Uber plays hardball with early shareholders • Hacker News Board

Re: Uber plays hardball with early shareholders

#81

Post by danielweber » Fri, Jun 20, 2014, 6:35 PM UTC

UweSchmidt wrote: post #46

gohrt wrote: post #14

Earlier quoted context omitted.

Ultimately, workers need to value the options properly: ~$0. Interestingly, with options/RSUs clauses in employement contracts, workers are making "investments" in privately held securities on the order of ~$100K. In general (outside of employment contracts) such investments are not legal if the worker is not signed off as a "sophisticated investor". I would like the SEC to close this loophole, by mandating some mini…

When we reach a point where all workers value options 0$, then the current startup system is dead.

Employers need to do something to address the candidates' concern if they value options at $0.

And I don't mean "explain and promise really hard that the employee won't get screwed over." How about letting the employee's options be safe against dilution? How about not refusing third-party offers unless you agree to pay the same asking price?

Re: Uber plays hardball with early shareholders

#82

Post by paul » Fri, Jun 20, 2014, 6:37 PM UTC

dsl wrote: post #71

paul wrote: post #67

Pre-ipo transfer restrictions are pretty normal. It never even occurred to me to try selling Google pre-ipo. It wasn't really a thing before secondmarket came along, and arguably trading on those markets is taking a company public without their consent. If I ever start another company, I would definitely have transfer restrictions. It's pretty important to control your equity, and I think the day-trading mentality is…

> It's pretty important to control your equity, and I think the day-trading mentality is toxic. Equity is compensation. You can't tell your employees what to spend paychecks on, and you shouldn't be trying to block them from gaining liquidity. Maybe a doctor just told them they have a year to live, and won't be around for your planned 2019 IPO. Unless you are granting them voting shares it is unfair to lock them into…

I agree that it needs to be clearly communicated (and perhaps they did not do that in this case), but there's no reason why equity must be liquid. I certainly have no expectations of immediate liquidity in my startup investments.

Voting is a non-issue. Assuming things are structured right, the founders should retain majority control. The investment is primarily an investment in their vision, not something to be micro-managed by shareholders.

Re: Uber plays hardball with early shareholders

#83

Post by [deleted] » Fri, Jun 20, 2014, 6:38 PM UTC

malandrew wrote: post #69

simulate wrote: post #59

Earlier quoted context omitted.

Are we talking about Charlie Ayers, the Google Cook? He earned $26 million from his options, not $200 million. He also had over 150 employees and 5 executive chefs reporting to him. He did well and was fortunate but he also wasn't just some guy in a lunch room preparing cafeteria food. EDIT: There is a nice description of Ayers in wikipedia: http://en.wikipedia.org/wiki/Charlie_Ayers

Exactly. Bean counters and penny pinchers will never fully realize the value of someone like that. He kept people well fed, with healthy options that let them spend more time socializing with their peers and getting back to their desks to code. The alternative is having people waste time in traffic commuting to the dearth of eating options (many of which are far less healthy. many engineers left to their own devices…

[deleted]

Re: Uber plays hardball with early shareholders

#84

Post by danielweber » Fri, Jun 20, 2014, 6:48 PM UTC

potatolicious wrote: post #61

opendais wrote: post #55

Earlier quoted context omitted.

I wasn't advocating you take a pay cut for options. ;) But I think $0 is wrong as well. http://online.wsj.com/news/articles/SB1000087239639044372020... 75% fail. 11% go public or acquired. It is a lottery ticket but those don't sell at $0.

A lot of those 11% are still "failures" for the employees though - IPOs almost always are positive for employees, but acquisitions are not. It is common for floundering companies to sell or go for acquihires, in which case your options are most certainly underwater and worthless. Even in small acquisitions (that aren't just a fire-sale in disguise) it's quite possible for the investors and founders to get paid, but l…

I know a number of places where the acquisition price was enough to perfectly cover whatever amount was needed to cover a majority of VCs on the board.

I.e., five people on a board, from VC group 1, VC group 2, VC group 3, the founder, and someone else. The VCs invested $44,140,000 into the company and get that at a minimum from any acquisition. Then the company gets acquired for $44,140,000.

I'm 99% sure this violates the fiduciary responsibilities a board of directors has, but, who the hell is going to sue?

Re: Uber plays hardball with early shareholders

#85

Post by opendais » Fri, Jun 20, 2014, 6:51 PM UTC

danielweber wrote: post #79

opendais wrote: post #47

Earlier quoted context omitted.

I have an Aunt who is no longer able to find a job in the industry she originally worked due to a legal battle with someone who is well known and respected in that industry. She has a job in a different industry now and makes significantly less [like 50%]. She doesn't think she'll be able to retire before 70 because of it. Admittedly, the industry was very small and incestuous and it isn't like Tech where labor holds…

family friend who is an idiot and did something similar for stupid reasons [it turns out he signed paperwork he thought he never had Was it a noncompete?

It wasn't a noncompete. It was an invention agreement.

Re: Uber plays hardball with early shareholders

#86

Post by danielweber » Fri, Jun 20, 2014, 7:05 PM UTC

opendais wrote: post #85

danielweber wrote: post #79

Earlier quoted context omitted.

family friend who is an idiot and did something similar for stupid reasons [it turns out he signed paperwork he thought he never had Was it a noncompete?

It wasn't a noncompete. It was an invention agreement.

Was it something like "we own your inventions while you work for us, and a year after you stop working for us"?

I've gotten that clause myself in an employee agreement. The company wanted me to sign and they said their lawyers "wouldn't let them" change it.

Re: Uber plays hardball with early shareholders

#87

Post by opendais » Fri, Jun 20, 2014, 7:23 PM UTC

danielweber wrote: post #84

potatolicious wrote: post #61

Earlier quoted context omitted.

A lot of those 11% are still "failures" for the employees though - IPOs almost always are positive for employees, but acquisitions are not. It is common for floundering companies to sell or go for acquihires, in which case your options are most certainly underwater and worthless. Even in small acquisitions (that aren't just a fire-sale in disguise) it's quite possible for the investors and founders to get paid, but l…

I know a number of places where the acquisition price was enough to perfectly cover whatever amount was needed to cover a majority of VCs on the board. I.e., five people on a board, from VC group 1, VC group 2, VC group 3, the founder, and someone else. The VCs invested $44,140,000 into the company and get that at a minimum from any acquisition. Then the company gets acquired for $44,140,000. I'm 99% sure this violat…

The minority VC that gets left out in the cold? ;)

Re: Uber plays hardball with early shareholders

#88

Post by robrenaud » Fri, Jun 20, 2014, 7:28 PM UTC

paul wrote: post #82

dsl wrote: post #71

Earlier quoted context omitted.

> It's pretty important to control your equity, and I think the day-trading mentality is toxic. Equity is compensation. You can't tell your employees what to spend paychecks on, and you shouldn't be trying to block them from gaining liquidity. Maybe a doctor just told them they have a year to live, and won't be around for your planned 2019 IPO. Unless you are granting them voting shares it is unfair to lock them into…

I agree that it needs to be clearly communicated (and perhaps they did not do that in this case), but there's no reason why equity must be liquid. I certainly have no expectations of immediate liquidity in my startup investments. Voting is a non-issue. Assuming things are structured right, the founders should retain majority control. The investment is primarily an investment in their vision, not something to be micro…

As a founder, how do you attract engineers from places like Google to your startup?

"I am Paul Buchheit, I made Gmail" seems like it would work for you, and something similarly awesome might work for like 10s or 100s of founders.

As a Google employee (with pretty high, low variance, liquid compensation), it seems having stock/options or options even a successful pre IPO company are kind of terrible. When you seemed to have won (worked for a successful company, vested), you don't even really win, or at least, not yet. Stay in that same desk, working on that same project until some indefinite future liquidity event happens.

Re: Uber plays hardball with early shareholders

#89

Post by joezydeco » Fri, Jun 20, 2014, 7:33 PM UTC

unchocked wrote: post #70

joezydeco wrote: post #33

Earlier quoted context omitted.

So, basically, your VC money is awesome, wonderful and welcome until the check clears...and then you're the "enemy" for wanting to stay in control of it. Doesn't this reduce every early investment in a startup into a binary thing? You either lose it all, or hit a home run. Unless you pull a Groupon and exit everyone before the IPO.

I believe the context is what an employee does with her equity stake, rather than what a founder does with the capital. And no, I don't think it does.

The quote mentions Uber investors, not employees, even though the article deals mostly with an Uber employee trying to sell shares. This is why I'm a bit confused.

Re: Uber plays hardball with early shareholders

#90

Post by dsl » Fri, Jun 20, 2014, 7:46 PM UTC

paul wrote: post #82

dsl wrote: post #71

Earlier quoted context omitted.

> It's pretty important to control your equity, and I think the day-trading mentality is toxic. Equity is compensation. You can't tell your employees what to spend paychecks on, and you shouldn't be trying to block them from gaining liquidity. Maybe a doctor just told them they have a year to live, and won't be around for your planned 2019 IPO. Unless you are granting them voting shares it is unfair to lock them into…

I agree that it needs to be clearly communicated (and perhaps they did not do that in this case), but there's no reason why equity must be liquid. I certainly have no expectations of immediate liquidity in my startup investments. Voting is a non-issue. Assuming things are structured right, the founders should retain majority control. The investment is primarily an investment in their vision, not something to be micro…

> an investment in their vision, not something to be micro-managed by shareholders

My point was exactly about vision. Founders vision often change from what was pitched when you join.

Let them have a say or let them out at a fair market price.