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Sell for half a billion and get nothing (2021)

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Re: Sell for half a billion and get nothing (2021)

#111

Post by gnicholas »

It's worth mentioning that the founders were no longer with the company, and the terms of their prior exit are not public:

> In this case, the minority shareholders are FanDuel's original founders, Nigel and Lesley Eccles, Tom Griffiths, Rob Jones, and Chris Stafford. None of the original co-founders still work at FanDuel, and it doesn't look like their original efforts will be rewarded — according to the deal documents, they're not going to make any money at all off of the company's sale. Of course, it's not clear what the financial terms were surrounding their departures from the company, and they could have negotiated a pay package [1]

Getting precisely zero is not terribly likely if the founders are still with the company, since they would typically be considered key to the value of the company (at least for a time).

There is/was apparently also a lawsuit about this deal. [2]

1: https://www.businessinsider.com/fanduel-founders-likely-to-l...

2: https://www.wsj.com/articles/fanduel-founders-former-employe...

Re: Sell for half a billion and get nothing (2021)

#112

Post by koliber »

justinlloyd wrote: post #45

I am currently working with a start-up where the company is incapable of meeting its capex obligations. The founder raised a good amount of capital from investors a few years ago, and that provided a decent runway, but there's no traction, no KPIs, and whilst we've built some impressive technology, impressive technology does not bring in revenue. One of the problems (amongst many) is that the primary stakeholder has…

They are unlikely to show the full cap table. Consider asking for the most recent 409a valuation, the total shares outstanding, and the size and liquidation preference of the past rounds. That’s a smaller ask that will give you the most important info.

Most likely you already know the answer.

In a fantasy scenario, you could take the stock they’re offering and demand to have a more senior stake and a 5x liquidation preference.

Re: Sell for half a billion and get nothing (2021)

#113

Post by choppaface »

DaiPlusPlus wrote: post #109
gnicholas wrote: post #103

Earlier quoted context omitted.

> No, it won’t have a 1 bil payout Does anything have a $1B payout for the founder? I guess there are a few companies that achieve this, but it takes only a modicum of humility to realize you're not likely to be one of the most successful founders this decade.

Even if anyone gets a cool $1b, the IRS is going to come for a good chunk of that...

IRS takes less than 50%.

Re: Sell for half a billion and get nothing (2021)

#114

Post by gnicholas »

DaiPlusPlus wrote: post #109
gnicholas wrote: post #103

Earlier quoted context omitted.

> No, it won’t have a 1 bil payout Does anything have a $1B payout for the founder? I guess there are a few companies that achieve this, but it takes only a modicum of humility to realize you're not likely to be one of the most successful founders this decade.

Even if anyone gets a cool $1b, the IRS is going to come for a good chunk of that...

Yep, although the qualified small business stock exemption comes in handy if/when that happens. You get to exempt a percentage of the gain of the sale of your stock, and if you roll over the gain into other QSBS (by investing in startups, for example), you can defer the non-exempted portion.

Re: Sell for half a billion and get nothing (2021)

#115

Post by RowanH »

bionsystem wrote: post #73
jv22222 wrote: post #62

> Lessons Learned: Build a Very Fundable Startup > Every founder should learn from this disastrous scenario the importance of building a very healthy, fundable startup. A healthy, vibrant startup draws more investors during fundraising. The competition gives founders the leverage to negotiate for more founder-friendly terms. Healthy startups get better valuations, better terms, and raise funds with much less effort.…

It's still better to have 10% of a billion rather than 100% of a million. It's just that "valuation" is only one of the metrics that really matters, and selling your equity has to be done progressively and by reading the small prints in every file. It's sad that startup founders have become so good at raising money that they forget that a path to profitability + understanding the actual financials (beyond just valuat…

It's just what are the odds of 10% of a billion vs 100% of a million.

Without any statistics at all to back this comment, I bet there are a magnitures more software companies out there that have made people 100% of a million, vs 10% of a billon. You're talking such a small pool (which might seem large in HN terms) when in reality there's an incredible number of small software companies globally.

Of course not discouraging anyone from shooting for the moon.

Re: Sell for half a billion and get nothing (2021)

#116

Post by choppaface »

justinlloyd wrote: post #45

I am currently working with a start-up where the company is incapable of meeting its capex obligations. The founder raised a good amount of capital from investors a few years ago, and that provided a decent runway, but there's no traction, no KPIs, and whilst we've built some impressive technology, impressive technology does not bring in revenue. One of the problems (amongst many) is that the primary stakeholder has…

You can at least file a wage claim without even having a lawyer https://www.calaborlaw.com/complaint/ In California, you are also entitled to more than minimum wage if you're an exempt SWE.

Re: Sell for half a billion and get nothing (2021)

#117

Post by choppaface »

dheera wrote: post #39
gumby wrote: post #6

Liq prefs vanished during the ZIRP and I haven’t seen them return…yet. But the founders do have some leverage. If there is no incentive to do the deal they can just… not cause the deal to happen (different from blocking it, just not working on it). This is the same reasons you see big pay packets for the execs when a company is doing poorly or is bankrupt: otherwise they could just go do something else (get a differe…

If you're on really shitty acquisition terms like this, to the point where you are getting no payout for your hard work, one way you can get a small payout is to negotiate your employment contract with the new parent company to be very, very good. Make sure they give you and all employees a nice big sign on bonus and salary. They can deduct that from the proposed acquisition price. Is it ethical? I say yes, you shoul…

And makes sure your sign-on bonus has no clawbacks. Make it a payment condition of the contract. The bonus is for your signature not your warranty service.

Re: Sell for half a billion and get nothing (2021)

#118

Post by earnesti »

whiplash451 wrote: post #108
jv22222 wrote: post #62

> Lessons Learned: Build a Very Fundable Startup > Every founder should learn from this disastrous scenario the importance of building a very healthy, fundable startup. A healthy, vibrant startup draws more investors during fundraising. The competition gives founders the leverage to negotiate for more founder-friendly terms. Healthy startups get better valuations, better terms, and raise funds with much less effort.…

That's not super useful advice for founders who (really) need some investment from the get go. The lesson would rather be: don't raise so much at the seed stage. Google got started with a $100K grant. FanDuel raised $400M in four years [1] And it looks like one of the the FanDuel founders did it again [2] This is reckless and should be a massive red flag for new joiners. [1] https://en.wikipedia.org/wiki/FanDuel [2]…

The general lesson is: be smart. Also, taking funding with really bad terms might make sense sometimes. However quite rarely.

The other viewpoint is, that typically at funded startups founders get some salary. You can view it also as an another job.

Re: Sell for half a billion and get nothing (2021)

#119

Post by nailer »

Analemma_ wrote: post #21
jmward01 wrote: post #14

I have a friend that has given up on options. Even if he were to be #10 somewhere he would take any extra pay over any options. Stories like this show the wisdom of that. Are there really that many success stories for people other than for VCs and (maybe) founders out there anymore? Even if your options (eventually) get you 200k, how much did they cost you in years of lower pay. Even with a payout, considering intere…

It's not just your friend: a lot of people have given up on options. Obviously they're underrepresented here on HN because this is a startup-focused forum, but I know many, many people who have concluded "options have an EV of zero, startups pay options in lieu of market-rate salary, therefore startups are a raw deal; I will only go to FAANGs". They're sort of a dark matter universe since they are only visible in the…

Is ‘EV’ enterprise value or something else? Thanks.

Re: Sell for half a billion and get nothing (2021)

#120

Post by baq »

DaiPlusPlus wrote: post #109
gnicholas wrote: post #103

Earlier quoted context omitted.

> No, it won’t have a 1 bil payout Does anything have a $1B payout for the founder? I guess there are a few companies that achieve this, but it takes only a modicum of humility to realize you're not likely to be one of the most successful founders this decade.

Even if anyone gets a cool $1b, the IRS is going to come for a good chunk of that...

If you’re paying taxes, you’re winning.
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