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When a Unicorn Startup Stumbles, Its Employees Get Hurt

nytimes.com

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Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#161

Post by balls187 »

arbitrage314 wrote: post #121
askafriend wrote: post #113

Earlier quoted context omitted.

Can you explain how you were able to invest 100k into a startup without being an angel investor?

Most startups are more than happy to take your money. Just email or meet with the founders, explain your enthusiasm for the company, and you're usually good to go! For higher-profile deals, though--e.g., Uber--you wouldn't be able to invest such a small amount.

> Most startups are more than happy to take your money. Just email or meet with the founders, explain your enthusiasm for the company, and you're usually good to go!

I would be highly skeptical of any startup founder who is going to take money from just anyone. Taking in random investment dollars could come back to bite founders and company in the ass pretty badly. From the time demanded by the investor, to working on subsequent financing rounds, you could really shoot yourself in the foot by doing this.

This is one reason why Angels are more sought after than "friends and family."

> For higher-profile deals, though--e.g., Uber--you wouldn't be able to invest such a small amount.

No. For late stage investments, even if you had the capital, you're beholden to the terms dictated by whomever is leading the round. They're not going to invest large sums of money and want to share rights with just anyone with the cash.

Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#162

Post by nostrademons »

Balgair wrote: post #151
arbitrage314 wrote: post #140

Earlier quoted context omitted.

Yeah, good point--I'd recommend investing only $10k or $20k if possible. One of my points, though, is that you are effectively investing $100k in the company by taking a crap deal to work there (e.g., via a $25k pay cut over 4 years of work). For that $100k, you're getting much less than you would get by simply straight-up investing $100k.

I see and agree to your point, taking that kind of cut in salary is an investment of that magnitude. However, there are not many people that could even afford to put 2k, let alone 10k into a company. For most, putting in the time to help a friend, possibly valuing the time at 10k and giving that to them for free, is a much easier and safer bet. I know that makes little sense in terms of dollars, but no-one I know of,…

Take a look at this thread:

https://news.ycombinator.com/item?id=10758278

Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#163

Post by beagle3 »

davidu wrote: post #11
untog wrote: post #4

The fact that some employees have to pay taxes based on the valuations that VCs dream up terrifies me.

Only those who early exercise, or exercise their stock as it vests. They did this to try and optimize for long-term capital gains. For most employees who leave their option grants as options, there is nothing to worry about. When you are given a grant of stock options, you can sometimes ask the company to let you exercise it early, and vest the shares instead of the options. If you do this when the fair market value…

> they can roll that tax credit forward to cover future gains they may get at some other point in the future. I'm not sure how long you can roll these losses forward, but I think it's for a substantial period of time.

IIRC it's only 7 years. For people who do a lot of transaction, that's enough. For employees that get to invest 3-4 years in a company to make a profit on equity, it's actually quite rare to make use of this.

Also, everyone keeps forgetting that even liquidity-event-induced-exercise very often doesn't come with the liquidity that makes it profitable: In the case of a public stock exchange event, the 6-month lock-up period required by SEC rule 144 (and/or the underwriters), the stock can go down 90%, which means you pay 15-60% taxes on imaginary gain, even if you played your cards perfectly. This one also applies to investors.

Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#164

Post by tlogan »

arbitrage314 wrote: post #111

I'm going to keep repeating this comment until the world hears it--I think most people joining startups are being taken advantage of without realizing it. Sorry to be repeating myself: If you're primarily interested in making money, or if you love the startup but not the compensation, you should NOT work at that startup. If you're a good developer, you can get a better deal by working at an established company and si…

I disagree because it is not true all startups offer less than market-base salary.

If a startup has VC backing then there is absolutely no reason for the startup to offer less than market salary. If a startup does not have money to pay employees then founders should raise more. Or sell more. Employees are not VCs. Simple. Also look this way: if start up is not offering market salary, then think this way: how that startup is going to attract talent from established companies (whose expertise are needed if that startup wants to become big).

On the other hand, If a startup has no VC backing and you are offered less than market salary you are then you should act as investor / co-founder. That will be definitely less money but it can be a great experience: money is not everything.

Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#165

Post by driverdan »

Balgair wrote: post #134
arbitrage314 wrote: post #111

I'm going to keep repeating this comment until the world hears it--I think most people joining startups are being taken advantage of without realizing it. Sorry to be repeating myself: If you're primarily interested in making money, or if you love the startup but not the compensation, you should NOT work at that startup. If you're a good developer, you can get a better deal by working at an established company and si…

Thanks for the comment, but 'investing' 100k, a sum FAR more than almost anyone reading the comment will ever see in their own bank accounts, is not 'investing' for most of us. Diversity and spreading the risk is bread and butter for almost all of us. Throwing 100k into a company you believe in' is a greater gamble than almost any reader could ever justify to their spouse and expect to stay married. You live in a ver…

It's like you didn't even read his full comment. His point was that he makes enough money that he can invest $100k a year and still make the same salary he'd get at a startup.

> a sum FAR more than almost anyone reading the comment will ever see in their own bank accounts

You're joking right? Engineers make six figures and can easily save $100k if they try. Your retirement account should have seven figures by the time you retire.

Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#166

Post by marme »

askafriend wrote: post #113
arbitrage314 wrote: post #111

I'm going to keep repeating this comment until the world hears it--I think most people joining startups are being taken advantage of without realizing it. Sorry to be repeating myself: If you're primarily interested in making money, or if you love the startup but not the compensation, you should NOT work at that startup. If you're a good developer, you can get a better deal by working at an established company and si…

Can you explain how you were able to invest 100k into a startup without being an angel investor?

It is not difficult be qualified as an 'angel investor' to the eyes of the SEC, which really means you met the qualifications of an accredited investor. All you need to qualify is a salary of 200k per year, as the OP said he was making 250k which means he qualified. While 200k seems like a lot i would guess the top 10% of engineers in silicon valley are making at least this much. With 10-20 years experience in software development or if you move up to manager you can reach this salary at any major tech company

http://www.investopedia.com/terms/a/accreditedinvestor.asp

Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#167

Post by acconrad »

czbond wrote: post #155
acconrad wrote: post #133

Earlier quoted context omitted.

I think I asked this from you in another thread - but this advice feels difficult to follow. Are you in SF? Do you work at a company like Netflix which is known for paying very high salaries? Or are you not fully a developer, but in management? Because national labor statistics show that even the top quartile of salaries is still much lower than this, so I'm not sure how realistic it is for even the HN crowd to just…

The number is "high" as a single datapoint, but only due to an inflated SanFran economy. A $250k SF job adjusted to where I live in Dallas is actually considerably less than I make. I would need nearly $370k in SF dollars to do the same thing. http://money.cnn.com/calculator/pf/cost-of-living/

Right I'm well aware of the cost of living, but he did answer that he was 30 and living in SF. I live in Boston which is of relative cost-of-living (and salary) parity to SF, but you don't see $250k jobs being advertised for Google, Twitter and Microsoft here in Boston. I also feel like that number is inflated because a big portion of that likely comes beyond base salary (stock options, etc).

Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#168

Post by acconrad »

arbitrage314 wrote: post #143
acconrad wrote: post #133

Earlier quoted context omitted.

I think I asked this from you in another thread - but this advice feels difficult to follow. Are you in SF? Do you work at a company like Netflix which is known for paying very high salaries? Or are you not fully a developer, but in management? Because national labor statistics show that even the top quartile of salaries is still much lower than this, so I'm not sure how realistic it is for even the HN crowd to just…

Ah, sorry I didn't respond before. I live and work in SF at a large company (not Netflix, but something pretty similar). I'm 80% a coder, 10% a manager, and 10% a data scientist, and I love my job. $250k salaries are very common at large companies these days--you just need to stick around and work hard for a few years. Even if you make $150k, my advice stands, but you should probably invest smaller amounts than $100k…

Same age as you, but in Boston, so relatively similar salary/cost-of-living. One question is - are you actually making $250k base? I feel like for many of these large companies, that's the total compensation package, and much of that "total" is around bonus and stock options. Is it more about sticking around than it is about getting in as a high-level engineer, or is it the pay grade? If I walk into Google and get hired as a senior engineer, most salary reports in the public domain show me making far less than $250k base, even in SF.

Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#169

Post by thedufer »

jerf wrote: post #41

Is there some other industry where, when a company stumbles, its employees don't get hurt? I live in Michigan, and when the car industry "stumbled" everyone I locally know at least knew someone who got hit, at the very very least with long-term stagnant wages even as their responsibilities amped up to cover the missing people, and they were the ones who came out relatively unscathed. I mean, the details of the articl…

The auto industry in Michigan didn't stumble. It crashed, hard. You can't compare that to a company selling for half a billion dollars and expect to be taken seriously.

Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#170

Post by pm24601 »

rebootthesystem wrote: post #107
justinph wrote: post #67

Earlier quoted context omitted.

At least with the auto industry, the unions were able to offer some protections for the worker. How many programmers belong to a union?

> How many programmers belong to a union? Thankfully none. One of the main reasons the car companies stumbled are unions. The whole thing has degenerated to insanity squared. For example, GM had a clause in their contract requiring them to not fire employees displaced by technology or automation. In other words, if you improve your workflow and process and can do the same work with 25 people instead of 100, you can't…

Ah, yes. The unions got GM to kill electric vehicle investment.

Ah, yes. The unions got GM to become lazy with quality and innovation in the 60's and 70's when GM had 60%+ market share.

Ah, yes. The unions forced automobile manufacturing management to take huge pay packages.

Ah, yes. The unions with their silly demands for a 40hour work , and sick leave (which the majority of Americans still don't have)

Read something other than wall street journal and forbes to get better info about unions.

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