LivingSocial: Employees' and Founders' Common Stock Now Worthless • Hacker News Board

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#211

Post by confluence » Thu, Feb 21, 2013, 6:16 PM UTC

drusenko wrote: post #189

doktrin wrote: post #134

Earlier quoted context omitted.

> 1. Take the least amount of stock possible is not a good generally-applicable rule. It might have worked for you in the past, but it sure wouldn't have worked well for any of the employees of Google, Facebook, Dropbox, Weebly, etc. A more accurate statement would be "...is not a good universally -applicable rule...". To add some numbers to the discussion, there are currently 203 startups listed on Angel List as hir…

I would be surprised if even 25% of those startups had a meaningful exit. But even at 25%, we're a very long way from the lottery odds -- that comparison always strikes me as quite misleading.

Depends on your definition of meaningful exits, actual number of meaningful exits, and dilution between rounds.

Indeed if you put a margin of safety on valuing any arbitrary startup before they get traction - EV does hit on or near zero.

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#212

Post by Duhck » Thu, Feb 21, 2013, 6:17 PM UTC

kevinskii wrote: post #208

Duhck wrote: post #185

Earlier quoted context omitted.

While I agree with a few things here, I also agree you are very much a cynic (and that can be good). I too am a cynic, but I also believe that the startup culture we have created has many more benefits than you seem to weigh in on. I don't work at a startup to get rich, I work at a startup to figure out what I did wrong with my own business(es) in the past. I joined each of the companies I have worked at in the past…

Rule #37 for becoming a better business person: Don't donate tens of thousands of dollars a year in charity to millionaires and billionaires. When one works for substantially below-market salary and flimsy equity, that's often essentially what he is doing.

I don't really know anyone aside from founders and first hires that take a pay hit to go work at a startup, most of my friends, and myself, make fair market salaries, but the learning opportunities are massive compared to the corporate alternatives.

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#213

Post by tlogan » Thu, Feb 21, 2013, 6:23 PM UTC

confluence wrote: post #55

Here are a few tips for others startup employees: 1. Take the least amount of stock possible - your startup is statistically unlikely to succeed. It'd be better to bump your salary up $10-20K than to get the stock. 2. Unless it's liquid - it's worthless. 3. Valuations pre-cashflow - are useless. Anybody can value anything at insane levels using just one dollar. I value HN at $1 billion by offering to buy only 1 share…

I think you are 100% right.

However, in the current job market you really cannot hire without offering market rate. The perks are nice and part of classical negotiation game. The "culture fit crap" is their loss - the job market is very competitive now. So I don't think any reasonable startup is offering salary below market rate.

But, the main point I want to say is that the critical problem now is that all these new companies do not offer anything additional to compensation: no learning, no great mentorship, etc. Their entire secret sauce is in their business model: not in technology or software product. So young engineers will not learn new technologies, algorithms, etc. and have great mentors.

So the first thing I tell to my younger colleges is to find a job in some software company - preferably related to systems, networking, and storage. That where you find very very interesting projects (that you can put on your resume) and have great mentors.

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#214

Post by confluence » Thu, Feb 21, 2013, 6:26 PM UTC

drusenko wrote: post #190

confluence wrote: post #139

Earlier quoted context omitted.

1. Yes it is. Startup failure rates are really that high. 2. No one knows these odds or who will actually succeed - it's the reason why being a VC is so random. Furthermore - failure rates still push the EV towards zero. 3. The difference between say $3 million at a $15 million valuation post money and my example aren't really that different. Valuation leverage is a huge issue that no one seems to talk about. 5. You…

1. Source please? 2. It all depends on what your failure rate is. It'd have to be astronomically high to truly "approach zero". 3. You're acting as if somehow VCs putting in millions of dollars are doing it for the express purpose of creating a fake valuation to screw employees. This is a spectacularly self-centered point of view. The reality is that what you call "valuation leverage" doesn't matter. The valuation se…

1. VC portfolio exits.

2. Dilution, liquidation preferences and different stock class rights do indeed push it towards zero.

3. No I'm not. I'm merely indicating that valuations are bogus.

6. Implicit force is still force - just because you haven't mandated it doesn't mean it's not enforced via threat of firing and peer pressure dynamics.

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#215

Post by confluence » Thu, Feb 21, 2013, 6:33 PM UTC

maerek wrote: post #167

colmvp wrote: post #145

Earlier quoted context omitted.

I don't think anyone could argue that employees deserve the same equity as founders. But what's really the difference between the first few employees and a founder? This is especially true for employees who are ridiculously crucial to the early success of a project when the value of the equity is non-existent. Is being part of a company 6-12 months earlier truly worth 10x-20x more than the next person?

Better question here - who are you to judge this? A prospective employee is by no means forced to accept employment with a start-up where they're receiving a smaller share of equity than the founders. There is no grounds for any sort of argument of what is "fair" when you are on the receiving end of a job offer. If it's not fair, don't sign on. If you don't like the terms of the deal, renegotiate or find another one.…

Problem with this thinking is that it assumes the employee knows what's fair and isn't being lied to by the startup.

That's really not the case.

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#216

Post by dangero » Thu, Feb 21, 2013, 7:03 PM UTC

btilly wrote: post #80

dangero wrote: post #40

Earlier quoted context omitted.

CVS, El Pollo Loco to name 2 that I've interacted with lately. When you buy something there, they give you coupons at the register for next time that are pretty deep. I'm guessing this is a proven effective marketing technique judging by the big companies using it.

The coupons that you're talking about are for specific products. The idea being that you come in to get that price on one thing, and wind up picking up others at full price.

CVS gives me on my receipt "$5 off next purchase".

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#217

Post by baak » Thu, Feb 21, 2013, 7:07 PM UTC

drusenko wrote: post #192

acheron wrote: post #165

Earlier quoted context omitted.

"1. Take the least amount of stock possible is not a good generally-applicable rule. It might have worked for you in the past, but it sure wouldn't have worked well for any of the employees of Google, Facebook, Dropbox, Weebly, etc." And for the people who won the Powerball, "Don't buy lottery tickets" wouldn't have worked well for them. That doesn't mean "Don't buy lottery tickets" isn't a good generally-applicable…

We're talking maybe 1 in 50 versus 1 in 175,000,000 so yes, the comparison to the lottery is useless.

1 in 50 seems... very, very optimistic. On top of that, the investment is higher than the lottery. The lottery costs you $1. This costs you ~$10-20k in salary, and possibly more in lost opportunities and time you would've had elsewhere.

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#218

Post by jarek » Thu, Feb 21, 2013, 7:08 PM UTC

MichaelApproved wrote: post #147

jarek wrote: post #144

Earlier quoted context omitted.

> It's a deal on the meal, not a deal on the tip. The tip is obviously dependent on the price of the meal: most people will tip more for a more expensive meal, usually following a ratio. (20% or what have you.) People ordering the more expensive meal on the menu by and large tip more than those ordering the least expensive meal. Why should this change for the groupon meal?

Because when you get the bill, it's reduced from the retail price. People tend to tip on the price in the final bill. That final bill is discounted and they base their tip calculations on the discounted price, not the retail price. Even if they mean to tip %20, that %20 is based off a reduced number so the waiter is not getting tipped on the full meal price. When I tip on a discounted meal, I calculate based on the r…

So, a disclaimer: I don't do groupons, restaurant or otherwise. But...

> Because when you get the bill, it's reduced from the retail price.

So? When you get the cheapest meal, it's 'reduced' from the average meal price too.

If hypothetically a restaurant's management was going to permanently drop its meal prices by half, would you still tip on the old price?

> that could be why waiters don't like daily deal customers.

If the restaurant is running a groupon, waiters have much more reason to dislike the management than to dislike the customers.

--

The tipping mechanism for paying restaurant staff semi-decent wages creates some really weird cases like this one. The dislike of discount shoppers would never be an issue in locations where meal prices pay for semi-decent staff wages - the financial risk would be taken up solely by the owners/management making the decision.

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#219

Post by ios84dev » Thu, Feb 21, 2013, 7:24 PM UTC

flyinRyan wrote: post #175

MichaelApproved wrote: post #121

Earlier quoted context omitted.

"I can't wait for these daily deal business to go away because I don't think it benefits anyone." If you don't like these deals, then don't use them but don't say that they don't benefit anyone. Customers benefit from these deals all the time. 50% off a meal is a great offer! I think the biggest problem with these deals (for the wait staff at a restaurant) is that people think they should tip based off the discounted…

>If you don't like these deals, then don't use When all your competitors are? Go make a business and try that strategy. >50% off a meal is a great offer! So great the company who set it up went right out of business despite an insane amount of funding. >I think the biggest problem with these deals (for the wait staff at a restaurant) is that people think they should tip based off the discounted meal, instead of the f…

Good luck changing that in the US. If you got waiters subject to the normal minimum wage then there might be potential. Hopefully you don't take your dislike of a system out on someone forced to work within it.

Re: LivingSocial: Employees' and Founders' Common Stock Now Worthless

#220

Post by kamloops » Thu, Feb 21, 2013, 7:29 PM UTC

I value the people who would be your potential co-workers and the social impact your work makes over how much stock I'd get or the "20% time" I'm given to work on non-core projects.

Startups do give you the opportunity to have a more hands-on role at the company considering the size of the engineering staff. Naturally (if you're driven and you're confident in your ideas and can work well with people), can make a bigger impact at a smaller company/startup than at some of the more established tech giants. I think experience you gain far outweighs the slim chance your 3000 shares of common stock will amount to anything. You can take that experience with you to a larger tech company.