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How Wizards of the Coast distributed equity as a startup

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Re: How Wizards of the Coast distributed equity as a startup

#71

Post by guelo »

tptacek wrote: post #47
alexose wrote: post #38

The next generation of startups is going to have to address some employee equity problems, I think. This notion that early hires are going to share a small piece of the 10% employee pool needs to stop. Being employee #1 of a startup can be one of the worst positions a young developer can ask for. Long hours, high stress, low job security, and for what? 0.5% of a company that, if it survives, will most likely dilute i…

Probably not, or that already would have happened. It hasn't. One problem is that a lot of people look at equity grants as a meritorious service award. But that's not at all what they are; they're compensation for risk. Developers look at risk compensation and say, "well, I undertook a lot of risk to work long hours for a lower wage". That's true, but the market prices that kind of risk, and the market cares a lot ab…

> the typical developer taking basis points for their participation is eminently replaceable by other developers

Is this true for the startup that needs to compete with Google and Facebook on attracting top-level talent?

> * developers ... should start their own companies

> * developers ... should instead work for larger companies that can pay them better wages.

So startups are missing out on these developers, can they afford to continue doing so if other startups start scooping them up?

Re: How Wizards of the Coast distributed equity as a startup

#72

Post by stephencanon »

Qworg wrote: post #70
tptacek wrote: post #65

Earlier quoted context omitted.

How else would you model companies and their staffing?

For new startups? A cult (of personality or of the religious persuasion)? A warparty? A pirate crew? All are good options.

> A pirate crew?

I. Every man has a vote in affairs of moment; has equal title to the fresh provisions, or strong liquors, at any time seized, and may use them at pleasure, ...

IX. No man to talk of breaking up their way of living, till each had shared one thousand pounds. If in order to this, any man should lose a limb, or become a cripple in their service, he was to have eight hundred dollars, out of the public stock, and for lesser hurts, proportionately.

X. The Captain and Quartermaster to receive two shares of a prize: the master, boatswain, and gunner, one share and a half, and other officers one and quarter.

Far more equitable than most startups.

Re: How Wizards of the Coast distributed equity as a startup

#73

Post by SeoxyS »

tanzania wrote: post #57
alexose wrote: post #38

The next generation of startups is going to have to address some employee equity problems, I think. This notion that early hires are going to share a small piece of the 10% employee pool needs to stop. Being employee #1 of a startup can be one of the worst positions a young developer can ask for. Long hours, high stress, low job security, and for what? 0.5% of a company that, if it survives, will most likely dilute i…

Yikes this hits close to home for me. I am employee #1 for a rapidly growing startup, been here nearly two years. It's my first developer position, I'm definitely underpaid (until our A-round apparently), but I have .5%. I feel like pretty soon it'll be apparent whether this is going to ~really~ take off (I honestly feel it will). Any advice on what steps I should take to prevent getting shafted?

I've been in this position. .5% of a rocketship is still pretty great. You'll end up with 1.25MM cash if the company exits at a billion (after 2x dilution and 50% taxes if you're in California). Yeah, it sucks to think about how much richer the founders got, whilst you worked just as hard… but it's still important to remember that you were very lucky to be in the right place at the right time, and be along for the ride.

Also, I bet you learnt a fuckton in this position which'll make it easy for you to accelerate your career. For me, seeing the hyper-growth from inside, taking on responsibility as the company grew, handling the shit as it hit the fan… that's priceless experience. Combine that + the 5MM I'll probably make out of it, and it doesn't matter how much better off the founders are, I still got a great outcome.

Re: How Wizards of the Coast distributed equity as a startup

#74

Post by JoeAltmaier »

negativeview wrote: post #54
JoeAltmaier wrote: post #44

Earlier quoted context omitted.

There's more to it than that. They've re-released edition after edition to obsolete the previous. Used to be 1 mana got you a 1/0 or 1/1 creature with nothing else. Now you can get cards with 1 or two features, flying etc. Anybody using the old ones is a sucker. Its easy to think its all about the money, you have to buy new cards to keep competitive. In fact this is why our game club designed their own card game (Ori…

As part of rebalancing they've buffed creatures and nerfed non-creature spells. It's simply not true that all cards have gotten more powerful, it's just that early creatures were garbage and early spells were too good. Nothing we've gotten in the last few sets compare to the original Dual lands, Channel, the Moxen, Ancestral Recall, Counterspell, or even something as innocuous as Dark Ritual.

Well, they're garbage if everything that comes after is inflated. That's my point.

Re: How Wizards of the Coast distributed equity as a startup

#75

Post by zaroth »

kauffj wrote: post #2

I love the idea of small scale stock offerings, but isn't this illegal? My understanding was that selling stock like this is a private equity offering and that private equity offerings are limited to a small number of people unless the investor is sufficiently rich (the government likes to use the term "accredited investor").

The most basic provision on a private sale of private stock places no restrictions on the sale that 'does not involve a public offering'. So in theory it's only when you start "looking" for investors, when you are "publicly" selling the shares, then you want a Reg D 506 exemption, and accredited investors.

However, in practice the Section 4(a)(2) exemption is often not strong enough protection (since we're talking potentially significant civil and criminal charges) so companies go for the Reg D safe harbors even when not technically required. Particularly for unsophisticated / unaccredited investors, the courts have found that 4(a)(2) is not good enough, even when the sale was arguably private. See, for example, SEC v. Ralston Purina Co., 346 U.S. 119 (1953). [1]

Following the path of Reg D 506 is actually quite simple, and carries no downside. But even with Reg D 506 you generally try to avoid unsophisticated investors, since then you get into scenarios where you are supposed to provide 'access to the kind of information that a registration statement would disclose' which is very difficult. The crowdfunding regs in theory are supposed to help alleviate this.

[1] - http://scholar.google.com/scholar_case?case=6019539454143305...

[2] - IANAL

Re: How Wizards of the Coast distributed equity as a startup

#76

Post by tanzania »

jacalata wrote: post #67
tanzania wrote: post #57

Earlier quoted context omitted.

Yikes this hits close to home for me. I am employee #1 for a rapidly growing startup, been here nearly two years. It's my first developer position, I'm definitely underpaid (until our A-round apparently), but I have .5%. I feel like pretty soon it'll be apparent whether this is going to ~really~ take off (I honestly feel it will). Any advice on what steps I should take to prevent getting shafted?

You say you think it will "really take off" - what's that mean, it's going to be a billion dollar company? Ok then, your 0.5% is going to make you 5 million dollars. That's a net win. But maybe you mean it's a 50 million dollar company - then, best case (no dilution, you stick it out until they IPO, let's say 5 years working there total) you could walk away with $250,000, or the equivalent of having been paid an extr…

Thanks for the perspective - this has been really helpful. I think no matter what happens it will have been an amazing experience that I lucked in to.

Re: How Wizards of the Coast distributed equity as a startup

#77

Post by zaroth »

zaroth wrote: post #75
kauffj wrote: post #2

I love the idea of small scale stock offerings, but isn't this illegal? My understanding was that selling stock like this is a private equity offering and that private equity offerings are limited to a small number of people unless the investor is sufficiently rich (the government likes to use the term "accredited investor").

The most basic provision on a private sale of private stock places no restrictions on the sale that 'does not involve a public offering'. So in theory it's only when you start "looking" for investors, when you are "publicly" selling the shares, then you want a Reg D 506 exemption, and accredited investors. However, in practice the Section 4(a)(2) exemption is often not strong enough protection (since we're talking po…

Just going to follow up on this to excerpt part of that Supreme Court decision;

  Exemption from the registration requirements of the Securities Act
  is the question. The design of the statute is to protect investors
  by promoting full disclosure of information thought necessary to
  informed investment decisions.[10] The natural way to interpret the
  private offering exemption is in light of the statutory
  purpose. Since exempt transactions are those as to which "there is
  no practical need for [the bill's] application," the applicability
  of § 4 (1) should turn on whether the particular class of persons
  affected needs the protection of the Act. An offering to those who
  are shown to be able to fend for themselves is a transaction "not
  involving any public offering."
I truly dislike the logic, why can't we stick with the plain meaning of the text, but they are trying to protect people from swindlers so I can understand their goal.

The end result is selling shares to the night janitor is almost certainly not allowed by 4(a)(2) but glad it turned out alright this time.

Re: How Wizards of the Coast distributed equity as a startup

#78

Post by debacle »

tanzania wrote: post #76
jacalata wrote: post #67

Earlier quoted context omitted.

You say you think it will "really take off" - what's that mean, it's going to be a billion dollar company? Ok then, your 0.5% is going to make you 5 million dollars. That's a net win. But maybe you mean it's a 50 million dollar company - then, best case (no dilution, you stick it out until they IPO, let's say 5 years working there total) you could walk away with $250,000, or the equivalent of having been paid an extr…

Thanks for the perspective - this has been really helpful. I think no matter what happens it will have been an amazing experience that I lucked in to.

> it will have been an amazing experience that I lucked in to.

I'm not really sure why you feel that way. Are you underskilled? You make it sound as though you're underpaid but then call it an amazing experience.

Re: How Wizards of the Coast distributed equity as a startup

#79

Post by negativeview »

JoeAltmaier wrote: post #74
negativeview wrote: post #54

Earlier quoted context omitted.

As part of rebalancing they've buffed creatures and nerfed non-creature spells. It's simply not true that all cards have gotten more powerful, it's just that early creatures were garbage and early spells were too good. Nothing we've gotten in the last few sets compare to the original Dual lands, Channel, the Moxen, Ancestral Recall, Counterspell, or even something as innocuous as Dark Ritual.

Well, they're garbage if everything that comes after is inflated. That's my point.

You said that they release more and more "to obsolete the old." My point is that was not their goal.

Their goal was always to have spells and creatures roughly balanced. Their original thinking was that creatures were a repeatable source of damage and thus should be costed as such.

Turns out they overestimated how much rarity mattered and underestimated the power level of creatures. As a result, we get pretty mediocre creatures and ridiculously powerful rare spells.

If every set were trying to outpower the last, then we wouldn't still get functional reprints of Llanowar Elves or Grizzly Bears, both of which were in Alpha.

Really, the power creep from year 1 to year 10 or so was a desire to see creatures played in competitive magic and a desire to see more actual games of magic (if your opponent wins the coin flip and goes Mountain, Black Lotus, Channel, Fireball then no actual magic was played).

Since then they've actually been doing a sort of power oscillation. Different parts get more powerful over time, then go back to weaker again. They mostly focus on Standard and Limited where the power level of older cards matter less.

In summary (I've already written too much) there's simple proof that the power level isn't endlessly increasing: look at Legacy and Modern. Every set that comes out adds between 0-3 cards that see Modern play and 0-1 cards that see Legacy play. If power level were just flat going up, that number would be much much higher.

Re: How Wizards of the Coast distributed equity as a startup

#80

Post by debacle »

JoeAltmaier wrote: post #44
pchristensen wrote: post #41

Earlier quoted context omitted.

They knew that it was unbalanced and that some cards (Moxen, Ancestral Recall, etc) were too powerful, but that was on purpose because they expected scarcity to be a part of the metagame. If you were playing with your own group of friends who owned a few cards, the small total number of overpowered cards would be a fun diversion. They didn't anticipate the huge success and scale the game achieved. With a worldwide me…

There's more to it than that. They've re-released edition after edition to obsolete the previous. Used to be 1 mana got you a 1/0 or 1/1 creature with nothing else. Now you can get cards with 1 or two features, flying etc. Anybody using the old ones is a sucker. Its easy to think its all about the money, you have to buy new cards to keep competitive. In fact this is why our game club designed their own card game (Ori…

The power creep that you're talking about didn't really start until Magic was about 10 years old. Since then, there have been back and forths but in general you're correct. If you took a Type II deck from 2000 to a tournament today you'd get stomped on.
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