Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Dear Unicorn, Exit Please

techcrunch.com

Post reply on HN
Print view View original

61–70 of 124 posts

Re: Dear Unicorn, Exit Please

#61

Post by api »

bkjelden wrote: post #24
chrisco255 wrote: post #3

Earlier quoted context omitted.

Exactly, no one wants the additional overhead, requirements, and legalities that go along with going public.

It's more than just overhead - going public forces you to think in terms of quarterly earnings reports. It's very hard for a tech company to thrive in that kind of environment - capital expenditures required to develop new products or enter new markets will often not be profitable for several years, and getting the public market to understand that is impossible.

So public markets essentially make long-term thinking impossible?

Re: Dear Unicorn, Exit Please

#62

Post by mune_write4 »

ryan-c wrote: post #60

I worked at a company for about five years. It became a unicorn while I worked there and I saw the value of my initial grant increase tremendously (something like 35x) over the years. I was significantly in debt and very nearly out of savings when I started there, so early exercise, while available, was not affordable to me. By the time I had money to exercise my shares, the potential AMT liability plus lack of liqui…

Face it tech-tards - the founders "own" you like vassal, and can burn the stock to send you into the poor house for the next ten lifetimes! hahahaha

Re: Dear Unicorn, Exit Please

#63

Post by beagle3 »

scurvy wrote: post #18

Allowing employees to make 83B elections on their options immediately after starting would help this situation a lot. Most companies don't "allow" you to do this. I've heard conflicting things on the subject. Some say the company has no say in the matter and it's purely in the IRS' court (exercise and notify IRS). Others say the company must allow you to do it. Second, the bogeyman of "letting some strange interloper…

> The myth that "having lots of shareholders increases costs too much" is also just a myth.

No, it isn't a myth. I used to work for a company which had to re-incorporate for various reasons, and had three shareholders too many; They managed to buy them out before the reincorporation, but it was a big problem (with lots of drama), and if an agreement wasn't reached, the company might have had to fold, and would definitely not have been as profitable, if it couldn't reincorporate.

IIRC, in the US it's 500 shareholders; We were subject to laws in several countries, the minimum of which had 40 shareholders trigger these problems. Regardless, it is not a myth -- having lots of shareholders has weird and unexpected costs.

Re: Dear Unicorn, Exit Please

#64

Post by michaelochurch »

I was hoping that this would be about the term "unicorn", which can't go away too soon. It reflects the juvenility of the Valley, that people are too creepy-humble amount money to say "a billion dollars" (teehee!) and have to hide behind a mythical creature. It also allows VCs to hide the fact that all they really care about is money (and I don't begrudge them for that per se, but for the dishnesty around it) by making a billion dollars sound like something other than what it is. (It reminds me of "change the world" nonsense, because you'd literally have to change the world to make unicorns exist.) If what you care about is making a lot of money and nothing else, then just admit it. There's plenty of company on Wall Street for that sort of person.

Seriously, fuck this "unicorn" shit and fuck that whole culture of juvenilty that comes out of the polar vortex of immaturity called Silly Con Valley.

Speaking of unicorns, if you want something to hate for the next few minutes, watch this video: https://www.youtube.com/watch?v=bMJIBxtDUHc .

Re: Dear Unicorn, Exit Please

#65

Post by sulam »

api wrote: post #2

Unicorns feel like an artifact of making it a little too hard to go public.

That's one factor, and one that the investment community likes to play up. I'm not really sure this applies in the unicorn case, though, since the amount of money that they're raising in the "private IPOs" they do dwarfs the reporting costs of being a public company.

The biggest factor, in my opinion of course, is that some large private investors realized that they could capture most of the upside in an IPO before the IPO actually happened. The first real example of this is DST and Facebook. This has obvious advantages for the private investor -- they get access to a source of high quality risk for their portfolio. It also has obvious advantages for the company -- they get access to capital without having to manage to Wall St's expectations (and that's no minor thing).

Facebook was sort of the proto-unicorn, and it spawned imitators. Those imitators were not just startups, it also spawned imitators on the investment side. Suddenly a source of relatively easy money -- the initial IPO allocation in "sure thing" companies -- weren't available to the usual suspects, and those funds have naturally followed the leaders into the D, E, and F rounds of the new breed of unicorns. These deals are even accessible to relative small fry now -- private bankers will routinely shop around access to these funding rounds to people with assets "only" in the 10's of millions. Sometimes they're shopping a theoretical deal that they want to present to the company in question, and sometimes they're shopping AirBnB.

At any rate, many of the gains you used to be able to get in companies like Amazon or Google are now going to people able to get access to these pre-IPO deals. Financing private companies is very different now than it was 5 years ago.

Re: Dear Unicorn, Exit Please

#66

Post by s73v3r »

"That might sound harsh, but put yourself in the CEOs’ shoes: It’s often in a company’s best interest to be able to reclaim equity if an exiting employee can’t afford to purchase his or her shares within 90 days of leaving."

I'm sure it would be in a company's best interest to chain their people to desks too. We don't allow that, for obvious reasons.

Re: Dear Unicorn, Exit Please

#67

Post by sulam »

7Figures2Commas wrote: post #51
sulam wrote: post #45

Earlier quoted context omitted.

The article doesn't state this well, but the additional cost comes from AMT. If you exercise your options you pay AMT on the face value of a share of common stock at time of exercise minus the exercise price (the spread). This is true regardless of whether or not those options are liquid at the time. For a unicorn, the stock has most certainly increased in value over time, which means the exercise price is a fraction…

Virtually nobody talks about the AMT credit when discussing ISOs and the AMT trap. Everybody assumes that AMT is this horrible beast, and while it's never a good thing, folks would do very well to have an experienced professional look at their unique situation and perform the calculations because it's often not nearly as bad as suggested.

I have a 7 figure AMT credit that will likely never be eliminated in my lifetime. People in this position hopefully all have competent tax attorneys who understand the credit. The reality is that the credit isn't very meaningful to people like me (and I am pretty typical among people who work at Unicorns).

Re: Dear Unicorn, Exit Please

#68

Post by manigandham »

scurvy wrote: post #39
joshjkim wrote: post #34

Earlier quoted context omitted.

you're right on the disclosure issue and cost issue - but I've always been more concerned with voting rights, which a strange interloper would certainly have. Especially in the context of M&A, the risk of a rogue common shareholder can be significant. I don't think it's a show stopper, but it is an issue.

Most founder series preferred shares have voting multipliers built-in. The fear of an interloper led takeover based on voting rights is another myth.

Most founders these days get common shares, not preferred.

Re: Dear Unicorn, Exit Please

#69

Post by balls2you »

ryandrake wrote: post #52
nemo44x wrote: post #44

Earlier quoted context omitted.

Capital gains taxes. When the "fair market value" of the company increases away from your strike price, when you exercise your options you have to pay tax on the difference between your strike price and the fair market value. And it will be a short term capital gain so it isn't cheap. If those .20 options of your have a fair market value of 5.00 now, you will owe tax on 4.80 of capital gains. 4.80 * 100,000 is 480,00…

Then, simply don't exercise your options--you won't have any taxes to worry about.

So if you don't exercise your options, then why take the pay cut and work twice as hard for a startup ? The whole thing reeks of a scam against early employees.

Re: Dear Unicorn, Exit Please

#70

Post by ryan-c »

ryandrake wrote: post #55
nathan_f77 wrote: post #48

Earlier quoted context omitted.

The company's valuation increases fifty-fold. Now you decide to exercise your stock options, and you pay $20,000. You have just paid $20,000 for stock that is now worth $1,000,000. The IRS now expects you to pay tax on your $980,000 in income. However, your stock is not liquid, so you can't sell it. This is why you can need "millions" to acquire your options.

Why would you exercise a stock option to receive stock you can't sell? If you can't sell it, it's not worth $1,000,000--it's a piece of paper that might one day be worth more or less than $1,000,000.

Because you'd like to do something new and if you leave you must either exercise within 90 days or lose your options.
Post reply on HN