When a Unicorn Startup Stumbles, Its Employees Get Hurt • Hacker News Board

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

#201

Post by [deleted] » Wed, Dec 23, 2015, 8:05 PM UTC

tostitos1979 wrote: post #150

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.

Would you mind sharing a few things: - age - Bay area/NYC or somewhere else? - how do u deal with taxes, 401K contributions and still have 100K leftover? I am possibly overcontributing 401K (maxing the 18K allowed by the IRS) and certainly overpaying rent (bay area :[). How the heck does one manage to save/invest 100K even at that salary? As a soon to be father, I need to get my act together asap.

[deleted]

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

#202

Post by URSpider94 » Wed, Dec 23, 2015, 8:09 PM UTC

acconrad wrote: post #168

arbitrage314 wrote: post #143

Earlier quoted context omitted.

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 hi…

Boston and SF are NOT comparable these days in terms of cost of living OR job market. Boston is probably #2, but it's a fairly distant #2.

$250k is a normal salary for an engineer with say 10 years experience in the Bay Area. It won't all be in a monthly paycheck, some of it will be in bonuses, restricted stock, etc., but it will be bankable and spendable annually, not locked away in illiquid assets (at least at a large company). Companies with long vesting schedules will supplement the early years with hiring bonuses until shares start to mature.

And this is why rent on a 2BR apartment in Mountain View will run you $3000 per month, and a 900 sq ft condo convenient to nothing in particular runs $850,000.

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

#203

Post by pmikesell » Wed, Dec 23, 2015, 8:10 PM UTC

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 only problem unique to the tech-unicorns here is exercising stock options when you can't pay for the taxes. Don't do that.

Ok, sure, but what do you do when you have all of this equity vested on paper and either 1) you get fired, or 2) you want to leave the company?

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

#204

Post by URSpider94 » Wed, Dec 23, 2015, 8:15 PM UTC

ryporter wrote: post #49

ditonal wrote: post #33

Very glad the NYTimes ran this piece. The only part they underplayed is they made it sound like the startup "stumbled." No, it sounds like it went exactly as planned. Blackberry got the acquisitions, investors got their money, execs got their bonuses, and the rank-and-file got nothing. That isn't stumbling, that's the playbook. Tech employees need to wake up about common vs preferred shares, and that the former are w…

According to the article, employees had the opportunity to sell their "worthless" shares for $3/share.

This is while the Board was still sitting on the information that the company was tanking in value, and they thought their shares were valued at $4 or more. Not after the sale.

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

#205

Post by ScottBurson » Wed, Dec 23, 2015, 8:19 PM UTC

rlucas wrote: post #82

ditonal wrote: post #33

Very glad the NYTimes ran this piece. The only part they underplayed is they made it sound like the startup "stumbled." No, it sounds like it went exactly as planned. Blackberry got the acquisitions, investors got their money, execs got their bonuses, and the rank-and-file got nothing. That isn't stumbling, that's the playbook. Tech employees need to wake up about common vs preferred shares, and that the former are w…

> Tech employees need to wake up about common vs preferred shares, and that the former are worthless. > ... > They are worthless because they are designed, as a financial instrument, to be fake equity with no real protection from dilution and liquidation preference. You've muddled orthogonal concepts together here. 1. Common shares are not worthless. In general, just ask any founder who's had a successful exit. Found…

That all makes sense, but potential startup employees still need to be educated about the reality that common shares are much less likely to be worth much than preferred shares. Specifically, if a startup asks a potential employee to take a below-market salary with an option package -- which happens all the time -- the potential employee is best advised to value the option package at zero. The real reason, if there is one, to accept a below-market salary at a startup is intangible: experience and connections.

Edited to add: your item 1 overlooks the fact that founders hold a much larger piece of the company than any post-founding employee. An exit that makes a founder wealthy may do nothing more than compensate an employee for the salary difference.

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

#206

Post by ScottBurson » Wed, Dec 23, 2015, 8:27 PM UTC

nostrademons wrote: post #95

nemo44x wrote: post #51

Earlier quoted context omitted.

I agree 100% with this. Employees should be suspicious that they have access to an investment nobody else does - invest now! I've seen countless friends get burned in various ways believing they would be getting rich soon from their options and then fizzle. Either through the company just never having a liquidity event or being sold for less than previous valuation rounds. The worst is I've seen people reject job off…

Employees do have access to an investment to an investment nobody else does. It's just that they need to do due diligence on par with or better than an investor to avoid getting taken advantage of. I've turned down more startup jobs than I can count. When I interview at a startup, I thoroughly research their market, their competitors, their product, and their business model. I ask questions about how they came up wit…

This post is so good I think you should expand it into a longer blog post and submit it to HN for further discussion. "How to evaluate a startup job" or some such.

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

#207

Post by 0mkar » Wed, Dec 23, 2015, 8:30 PM UTC

arbitrage314 wrote: post #159

tostitos1979 wrote: post #150

Earlier quoted context omitted.

Would you mind sharing a few things: - age - Bay area/NYC or somewhere else? - how do u deal with taxes, 401K contributions and still have 100K leftover? I am possibly overcontributing 401K (maxing the 18K allowed by the IRS) and certainly overpaying rent (bay area :[). How the heck does one manage to save/invest 100K even at that salary? As a soon to be father, I need to get my act together asap.

I'm 30 years old, and my rent is about $1200/month (I'm married, which helps cut down on costs). After taxes, $250k becomes $150k. After rent, food, staying alive, some travel, etc., I'm left with about $100k disposable per year. Like most of you, I don't really have nice things, fancy clothes, etc. I would continue to max out contributions to retirement accounts, though! You can invest in startups via IRAs and Roth-…

Thats interesting. Can you please share how you invested in startups via Roth-IRAs? I am exploring ways to do something similar.

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

#208

Post by ScottBurson » Wed, Dec 23, 2015, 8:31 PM UTC

tvladeck wrote: post #175

beagle3 wrote: post #126

Earlier quoted context omitted.

This is often repeated wisdom, and it is quite wrong. If the liquidity event involves the public stock market in any way e.g. IPO, merger, acquisition with a nontrivial part of the proceeds paid in shares of a public company - then you are forced to execise on one hand, and have a lock-up period, usually 6 months, forced by the underwriters or SEC rule 144. That is, there is a mandatory 6 months wait between the forc…

You're making the point that if there were a liquidity event they'd be forced to exercise. I made the point that they didn't have to exercise when they did, and if they had waited they wouldn't have taken on any risk about the price of the stock they were receiving. Note how those are not mutually exclusive.

But beagle3's point is that the lock-up period means you still take on risk even if you wait until the liquidity event. Perhaps this is less risk in many cases, but it still isn't zero.

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

#209

Post by arbitrage314 » Wed, Dec 23, 2015, 8:38 PM UTC

0mkar wrote: post #207

arbitrage314 wrote: post #159

Earlier quoted context omitted.

I'm 30 years old, and my rent is about $1200/month (I'm married, which helps cut down on costs). After taxes, $250k becomes $150k. After rent, food, staying alive, some travel, etc., I'm left with about $100k disposable per year. Like most of you, I don't really have nice things, fancy clothes, etc. I would continue to max out contributions to retirement accounts, though! You can invest in startups via IRAs and Roth-…

Thats interesting. Can you please share how you invested in startups via Roth-IRAs? I am exploring ways to do something similar.

I used a Pensco self-directed IRA:

https://www.pensco.com/

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

#210

Post by steven2012 » Wed, Dec 23, 2015, 8:41 PM UTC

ChuckMcM wrote: post #192

rday wrote: post #182

Earlier quoted context omitted.

>Employees don't cash out some of their holding at $3/share expecting a bigger IPO lift. Both angry because nobody came from the future to tell them, hey this is the best offer you are ever going to get for this stock, take it. Quoting from the article: >Employees had little idea that an outside appraisal firm had valued Good at $434 million and the common stock at about 88 cents a share as of June 30, according to i…

I'm not arguing, but I would like to point out that you've just fallen into the same trap I was discussing. According to the article the employees had a chance to sell shares at $3 a share, later it came out that an outside firm felt the shares were worth less. The trap is using information from later to beat yourself up about what you didn't do then. It is an easy trap to fall into, you're in your own future looking…

This is the same trap that most stock traders fall into. I've spent a lot of time trading, and when I confer with some of my other friends who trade we always talk about how we bought too late, sold too late, sold too early, etc.

I came to the conclusion early that the only way a trader could be happy is if they bought at the very bottom and sold at the very top. Otherwise there was always a lingering sense of regret. The only way you could have done that is if you can see the future, which is obviously impossible, but your sense of regret doesn't think about that.

After that realization, I decided that I make my selling decisions based on best knowledge at the time of sale, and not to regret selling for higher later on, because it would be impossible to know if it went up further or not.