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Startups Rejecting Venture Capital

nytimes.com

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Re: Startups Rejecting Venture Capital

#201

Post by dunpeal »

megaman8 wrote: post #181
hn_throwaway_99 wrote: post #152

Earlier quoted context omitted.

What was your equity compensation at these companies? Given that many (most?) companies refresh equity grants, it's very possible that after a full vesting period (usually 4 years) that you would then have multiple RSU grants vesting every year. With ~150k annually in RSUs, 150-200k base salary and 15-25% bonus is how lots and lots of people attain compensation this high.

It was always worthless Options that could never be sold. One company's options I worked for 6 years, was worth about 4K after taxes, fully vested. Our typical bonuses were 1-2%. A 10% bonus was considered very high.

> It was always worthless Options that could never be sold. One company's options I worked for 6 years, was worth about 4K after taxes, fully vested.

There's your problem.

Getting paid in options is the exact mistake I've warned about repeatedly in comments throughout this thread.

Yours is a fairly common case in SV: worked in a series of startups that "paid" you in illiquid options that ended up being totally worthless.

I'm willing to bet these very same startups encouraged you to value these options very highly: high 6 and even 7 figures, right?

These places don't pay well, because why should they? Talent is apparently willing to work their ass off for these "worthless options" that are sold to them as vouchers for surefire multi-million-dollar jackpots.

Re: Startups Rejecting Venture Capital

#202

Post by twtw »

lpolovets wrote: post #49

Caveat: I'm a VC, so I definitely have a horse in this race. A few misc comments: - VC is not for every company. Most VCs will be the first to tell you that: if you're not trying to build for a specific type/size of outcome, then VC funding is going to suck for you, and it's going to suck for the VC. It's not at all in a VC's best interest to invest in a company that has no desire to fit the VC model. - I think the V…

> I think the VC model itself is a great development from the last century. The fact that someone can raise millions (more than most people earn in a lifetime!) with an idea enables a lot of innovation that would be hard to nurture otherwise

Isn't this what the public stock markets used to be used for, before an IPO became a way to cash out?

Re: Startups Rejecting Venture Capital

#203

Post by foobiekr »

woolvalley wrote: post #103
billconan wrote: post #80

Earlier quoted context omitted.

I’m about to join a startup. I just want to do meaningful work and learn new things. I view it as a learning experience. I am so fed up with corporation life. I don’t see a way out other than joining a startup or starting my own. I don’t want to deal with project managers and fill their spreadsheets anymore. The most valuable thing I have is the remaining time I have in this life. Not the number in my bank account.

I work at a big tech co. I almost never fill out any spreadsheet, use JIRA, use a ticketing system that strongly, worry about 'user stories', have 'hurry up and wait' deadlines and so on. Maybe go to another big co?

I would love to know about the list of "good" big companies (and good teams within them). In my direct experience, the big companies are soul crushing and monotonous and one is surrounded by mediocrity.

Re: Startups Rejecting Venture Capital

#204

Post by will_brown »

hsk0823 wrote: post #139
will_brown wrote: post #119

Earlier quoted context omitted.

The Green Bay Packers are valued at $2.35B...not bad for a non-profit. How is the Packers model a scam? Because people support it and don’t get profits? Does that make the 90% of VC funded startups that fail scams? Are other NFL teams that are privately owned scams, because as I said the NFL publicly acknowledges the Packers community ownership is a competitive advantage over the other teams. Sure maybe people won’t…

It's a scam because the equity have any decision making power. It's still controlled by a small group of people aka the board of directors, the stock structure is setup that fans could not mount a hostile takeover. It's called ownership, but it's not, it has no value, it cannot ever be sold back, it doesn't grant you any say over how the team operates. The Packers are not a community owned organization, it's operates…

>It's a scam because the equity have any decision making power.

Well there is no equity as there is no equity in any non profit corporation. That doesn’t make nonprofits a scam.

The shareholders elect the board and the board elects the officers and the officers control the day to day operations.

>It's still controlled by a small group of people aka the board of directors, the stock structure is setup that fans could not mount a hostile takeover

Well stockholders do get invited to the annual meeting and vote for a number of those directors.

You can claim all you want investor won’t invest when they can’t get their investment back, but again the Packers are proof you are wrong, no shareholder can recoup their investment much less make a profit, but they have no problem raising as much as $250M when they had their last 2 public offerings.

Edit: another example is the Gates foundation, supporters donate because the believe in the organization (like the Packers) yet supporters have even less rights than the Packers shareholders and obviously no chance of a “hostile takeover” and yet people “invest”/donate.

Re: Startups Rejecting Venture Capital

#205

Post by dunpeal »

mosdl wrote: post #128
megaman8 wrote: post #116

Earlier quoted context omitted.

> "hope to make 400k" Even with 10-20 years of experience in the bay area at small, medium, large size software companies, I've never ever made anything close to that amount.

don't listen to them, the FAANG pay thing is only for select few and is obviously a bubble waiting to pop

> don't listen to them

GP has replied elsewhere that all his employers were startups that paid him in "worthless options".

Indeed, you won't ever see $400k or even $300k working for startups that "pay" you in illiquid 0.001% stakes in what will surely become a multi-billion dollar runaway success (in which unlikely case your share will be diluted to nothing anyway).

You can certainly stick your fingers in your ears and sing LALALA while the rest of us make real money,. Your life, your choice.

Re: Startups Rejecting Venture Capital

#206

Post by icedchai »

jon-wood wrote: post #196
aliston wrote: post #177

Earlier quoted context omitted.

Why RSUs over options? In CA, in particular, if you're at a rocketship, the tax benefits of early exercised options can be huge, whereas with RSUs you're paying 30-40% to the government.

Options are often not worth the paper they’re printed on. For pre-IPO, pre-acquisition, companies there’s no real market for those options. You may well be able to get better tax rates on them, but only if you can actually sell them. Compare that to RSUs which you can exchange the day they vest for actual cash, with a minimum of fuss. For perspective here I, and everyone I know who have worked for startups as an empl…

Paper? You don't even get paper stock certificates these days. It's all electronic.

At a previous company, I exercised my stock options when I left. This cost me about $4K. Two years later, I got $12K back... not a bad return, but certainly not the "potential for early retirement" I was told when I joined.

Re: Startups Rejecting Venture Capital

#207

Post by will_brown »

sflanagan wrote: post #95
will_brown wrote: post #58

Earlier quoted context omitted.

I think it’s just the start, soon there will be a much larger paradigm shift. Especially in tech where there is generally a large community of supporters who are willing to fund the projects they believe in directly. I think the Green Bay Packers is a perfect example, it’s the only “publicly owned” football team in the NFL and as a result when they need funding for large projects (like stadium renovations) they go st…

Who makes money off of the Packers? Startups may not be willing to take this model on if its less profitable for founders

Packers are nonprofit but there are other sports teams/organizations that have similar public offerings to raise funds/capital that are for profit entities.

Re: Startups Rejecting Venture Capital

#208

Post by bayesian_horse »

One problem with rejecting venture capital (or any other form of external capital) is that the founders (and likely the early employees) are investing in the company, in the form of lower pay.

Which is all fine and dandy, but the founders are likely risking most of their net worth, including the potential income of some of their best years. Taking outside capital not only means growing faster, but also diversification.

Re: Startups Rejecting Venture Capital

#209

Post by hsk0823 »

will_brown wrote: post #204
hsk0823 wrote: post #139

Earlier quoted context omitted.

It's a scam because the equity have any decision making power. It's still controlled by a small group of people aka the board of directors, the stock structure is setup that fans could not mount a hostile takeover. It's called ownership, but it's not, it has no value, it cannot ever be sold back, it doesn't grant you any say over how the team operates. The Packers are not a community owned organization, it's operates…

>It's a scam because the equity have any decision making power. Well there is no equity as there is no equity in any non profit corporation. That doesn’t make nonprofits a scam. The shareholders elect the board and the board elects the officers and the officers control the day to day operations. >It's still controlled by a small group of people aka the board of directors, the stock structure is setup that fans could…

There's three ways to raise money. You can finance it (debt) or you can sell ownership (equity), or the last one, people can randomly throw money at you and expect nothing in return. The last method of raising funds are donations, those aren't an asset that can produce dividends, or earn interest, that's the opposite of an investment, it's an expense. A charitable one generally to get more favorable tax incentives.

Of course you can have equity in a non profit. That doesn't mean your entitled to profits that don't exist, it means you have a stake in the organization. And the # of outstanding stocks versus the # of stocks held by the general public is a tiny fraction of what the Packers are worth, but again those silly pieces of paper are not proof of equity or ownership, it's literally memorabilia fans traded cash for a piece of paper that says they own something even though they have no power of ownership, the annual shareholder meeting is for show, so to call it an investment like a traditional stock would be isn't fair, it's really not the same thing.

What you are describing is development office, going out to ask for donations for a cause. That's not the same as running a venture that's going to make profit for shareholders.

Re: Startups Rejecting Venture Capital

#210

Post by hsk0823 »

will_brown wrote: post #207
sflanagan wrote: post #95

Earlier quoted context omitted.

Who makes money off of the Packers? Startups may not be willing to take this model on if its less profitable for founders

Packers are nonprofit but there are other sports teams/organizations that have similar public offerings to raise funds/capital that are for profit entities.

You keep calling it a public offering, but the reality is, a public offering is selling parts of your company for cash, aka a stock, ownership has it's privileges, without those privileges, you aren't selling anything to the public, the public is giving you money in return for a piece of paper and a fuzzy good feeling inside. I don't invest to get a fuzzy good feeling inside. I donate for that.

Donations are not investments. They're expenses. Investments must have a return of some monetary vale, or else it's an expense.

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