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At Booming Toptal, No Stock for Employees or Investors

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Re: At Booming Toptal, No Stock for Employees or Investors

#11

Post by rahuldottech »

I am a teenager, and know nothing of starting or running a company. That said, from what I have read, is it not true that investors who hold equity constantly apply pressure to maximise profits, often leading to companies doing... unethical things?

Whenever I've complained about a company being unethical or user-unfriendly, a friend of mine who lives in the US and knows more about this stuff always points out that because of pressure from investors, companies are often forced into such practices, and theorises that any company that takes outside investment in exchange for equity is always going to end up this way.

Re: At Booming Toptal, No Stock for Employees or Investors

#12

Post by tschwimmer »

A lot of Sillicon Valley startup fundraising ends up resembling an iterated prisoner's dilemma. Most startups fail and it's likely that you might have to work with people a few times before you get it right. The [generally] dominant strategy for Iterated Prisoner's dilemma is tit for tat[0], and consequently you see a lot of people cooperating when when it might be more lucrative to defect is because they know that they might want to work together again. Basically, neither side wants to burn the bridge.

This guy seems to have reasoned that for him, it was more optimal to defect, and it seems to have worked out. TopTal succeeded and he didn't raise any more money. His reputation with VCs is torched, but he doesn't need to raise any more money. If TopTal had failed, it really wouldn't have mattered because he wouldn't have needed to raise any more either.

You have to wonder if VC will eventually become a market for lemons[1] as founders who know they have a big opportunity only offer investors unfavorable terms. Obviously no startup is a 'sure thing' but it does seem like founders increasingly have a lot more information than their investors.

[0]https://en.wikipedia.org/wiki/Tit_for_tat

[1] https://en.wikipedia.org/wiki/The_Market_for_Lemons

Re: At Booming Toptal, No Stock for Employees or Investors

#13

Post by WheelsAtLarge »

I'm I missing something? It seems to me that everyone involved knew what they where getting into specially the investors. You hear about the cases where founders get screwed all the time. This is a case where a founder gets to keep his company. Good for him.

I for one think it's a bit greedy after all he did not build the company all by himself but silicon valley investment is all about greed. It's just another day.

Re: At Booming Toptal, No Stock for Employees or Investors

#14

Post by SpicyLemonZest »

rahuldottech wrote: post #11

I am a teenager, and know nothing of starting or running a company. That said, from what I have read, is it not true that investors who hold equity constantly apply pressure to maximise profits, often leading to companies doing... unethical things? Whenever I've complained about a company being unethical or user-unfriendly, a friend of mine who lives in the US and knows more about this stuff always points out that be…

Some people certainly do unethical things to keep their investors happy. That's not really a problem unique to investors, though; other companies do unethical things to keep customers happy or keep their employees happy.

Re: At Booming Toptal, No Stock for Employees or Investors

#15

Post by elsewhen »

WheelsAtLarge wrote: post #13

I'm I missing something? It seems to me that everyone involved knew what they where getting into specially the investors. You hear about the cases where founders get screwed all the time. This is a case where a founder gets to keep his company. Good for him. I for one think it's a bit greedy after all he did not build the company all by himself but silicon valley investment is all about greed. It's just another day.

Luring employees with promises of equity and then not delivering sounds like a bait and switch.

Re: At Booming Toptal, No Stock for Employees or Investors

#16

Post by ryandrake »

bnt wrote: post #8

I think the article misses the point: are we now in an era where you actually expect to get stock when you join a company? As a former Toptal employee: IMHO the co-founder in question was widely regarded as a horrible manager, often pushing people to burnout and generally imposing a culture of secrecy and mistrust. The VPs they ousted were nothing better. I personally went through several burnouts while there, but al…

I’d say at about half of my jobs (tech) compensation included some equity and at about half it did not. I wouldn’t say it’s expected but it’s nice when you get it.

When employees don’t have an equity stake, it can make for awkward moments. I’m reminded of a company all-hands, where the CEO announced a record quarter, and apparently the company’s stock just went up 60% or something. The handful of senior execs who did have equity cheered and did some lame hi-5’s while the rest of the employees shrugged and silently looked at each other like “should we be applauding now?”

Awk—ward...!

Re: At Booming Toptal, No Stock for Employees or Investors

#17

Post by emilsedgh »

rahuldottech wrote: post #11

I am a teenager, and know nothing of starting or running a company. That said, from what I have read, is it not true that investors who hold equity constantly apply pressure to maximise profits, often leading to companies doing... unethical things? Whenever I've complained about a company being unethical or user-unfriendly, a friend of mine who lives in the US and knows more about this stuff always points out that be…

It really depends on the company culture, sector, etc. There's a lot of dynamics in here.

Public companies are generally more prone to this issue, as all the ethics become abstract to shareholders. They are not involved in the dirty work.

A lot of times, companies do the right thing not because of morality, but because doing the wrong thing has a risk (from a PR disaster to a regulatory issue).

If the culture of the company is willing, the whole concept of morality is reduced to a risk/benefit formula. And they start to learn how to reduce risk, and it's a downhill from there.

Re: At Booming Toptal, No Stock for Employees or Investors

#18

Post by scarmig »

WheelsAtLarge wrote: post #13

I'm I missing something? It seems to me that everyone involved knew what they where getting into specially the investors. You hear about the cases where founders get screwed all the time. This is a case where a founder gets to keep his company. Good for him. I for one think it's a bit greedy after all he did not build the company all by himself but silicon valley investment is all about greed. It's just another day.

At the very least, he ran a scam on his employees, who he lured into the company with the promise of a big payoff if it became successful.

If "everyone knew" what they were getting into, why did he feel the need to give them what amounts to monopoly money to convince them to work their asses off for him?

Re: At Booming Toptal, No Stock for Employees or Investors

#19

Post by bilbo0s »

elsewhen wrote: post #15
WheelsAtLarge wrote: post #13

I'm I missing something? It seems to me that everyone involved knew what they where getting into specially the investors. You hear about the cases where founders get screwed all the time. This is a case where a founder gets to keep his company. Good for him. I for one think it's a bit greedy after all he did not build the company all by himself but silicon valley investment is all about greed. It's just another day.

Luring employees with promises of equity and then not delivering sounds like a bait and switch.

I don't know man?

Just Devil's Advocate here, but as an employee going into a startup it's kind of well known at this point that you're only likely to get what's written in black and white. Would you go to work for a company that promises to start paying you at "sometime in the future"? I kind of agree with WheelsAtLarge, you had to have known what you were getting into. Personally, I wouldn't work for someone for free for any length of time unless it's volunteering. Anything else just sounds fishy.

Similarly, if someone promises you equity "later if [blah blah blah]"? I'm just saying, that sounds pretty fishy.

Re: At Booming Toptal, No Stock for Employees or Investors

#20

Post by staticautomatic »

elsewhen wrote: post #15
WheelsAtLarge wrote: post #13

I'm I missing something? It seems to me that everyone involved knew what they where getting into specially the investors. You hear about the cases where founders get screwed all the time. This is a case where a founder gets to keep his company. Good for him. I for one think it's a bit greedy after all he did not build the company all by himself but silicon valley investment is all about greed. It's just another day.

Luring employees with promises of equity and then not delivering sounds like a bait and switch.

But they weren't lured with the promise of equity. The promise was that they'd get equity if there was a subsequent funding round.

The investors, especially, have zero right to complain.

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