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My company sold for $100M and I got zilch – how can that be?

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Re: My company sold for $100M and I got zilch – how can that be?

#341

Post by WalterBright »

4ntonius8lock wrote: post #330
WalterBright wrote: post #299

Earlier quoted context omitted.

> putting up all the work Generally speaking, the big money goes to the people who risk, not the people who work. If it didn't work that way, who would finance a risky project? Investors may or may not get paid sometime in the future, while employees get paid today, whether what they do works out or not.

So people who work for a start up aren't taking risk? Employment is more than just the paycheck. It's security. It's a career trajectory. Otherwise, why do consultants get paid more than employees? You can see it that employees take no risk. That's fine. But then I wonder why start ups tout the stocks they give? And why is it acceptable to tout something that they know has no value? The SEC has a function. To avoid d…

> So people who work for a start up aren't taking risk?

Not at all like the risk of putting in a big chunk of your own money. When you lose it, it's gone. Too bad, so sad.

Employees have the lowest risk position. They get first claim on the money owed for their paychecks and there are many legal protections for that. The investor is frequently last in line, and gets nothing if the company bankrupts.

> described in the article is deeply unfair

My reading of it was slightly different than yours. If the company hadn't gotten the overhang investment, they would have gone bankrupt and the employee would have lost their job sooner. If the overhang wasn't offered, the investors would not have invested. There was no path for the employee to cash in the stock - unless the value of the company was larger than $100m. But it wasn't.

Re: My company sold for $100M and I got zilch – how can that be?

#342

Post by alephu5 »

vsl wrote: post #340
superqd wrote: post #319

Earlier quoted context omitted.

There is a deep flaw in this logic. Person A and Person B are both investing the same amount, just in different forms. Person A converted their 100k into 1 year of time . Person B converted their 1 year of time into 100k of money . They both put in 100k of something , B put in 100k worth of time, A put in 100k worth of money. If we assume a fair market rate for the conversion, then essentially this is a perfect excha…

> and hence should split the reward equally Are you saying that when a company fails, all employees should return their past salaries paid by that company? Because that’s what splitting the (negative here) reward equally with investors would mean.

Yes, give the employees back the time they've spent and they'll refund the money.

Re: My company sold for $100M and I got zilch – how can that be?

#343

Post by Hex-3-En »

harryh wrote: post #131

FWIW, I kind of don't believe that this question is real. Questioner clams that he is a VP but also: > He has no idea how liquidation preferences work > He was "told" that the company was being acquired (instead of being involved in the sale) > No one at the company walked him through how his stock was valued, even after the acquisition. To the point that he thinks he needs to hire a lawyer. It's a fine question to u…

"VP of engineering", not Business, you need to look closer before writing something like your theories...

Re: My company sold for $100M and I got zilch – how can that be?

#344

Post by krn »

blihp wrote: post #229
harryh wrote: post #131

FWIW, I kind of don't believe that this question is real. Questioner clams that he is a VP but also: > He has no idea how liquidation preferences work > He was "told" that the company was being acquired (instead of being involved in the sale) > No one at the company walked him through how his stock was valued, even after the acquisition. To the point that he thinks he needs to hire a lawyer. It's a fine question to u…

The title is not a meaningful gauge of a person's knowledge or experience. It wouldn't be unheard of for a VP at a company with 50 employees to have similar responsibilities as a manager at a company with 1000 employees. They could also be VP of Engineering/Customer Service/etc. which would typically not be expected to have much, if any, legal or finance knowledge.

> They could also be VP of Engineering/Customer Service/etc. which would typically not be expected to have much, if any, legal or finance knowledge.

That's in the article:

> Four years ago, I landed a VP of engineering job at a red hot startup, for which I was granted options for 2% of the company.

That person could have easily been a Senior Software Engineer at FAANG before becoming a VP of engineering at a startup.

How much do Level 5 engineers at Google know about liquidation preferences if they have never worked at a startup before?

Re: My company sold for $100M and I got zilch – how can that be?

#345

Post by microtherion »

foobiekr wrote: post #93
paulgb wrote: post #28

Earlier quoted context omitted.

By being transparent and giving all the numbers needed for the employee to make a good decision. For what it's worth, I've always valued options at private companies as zero in making career decisions and looking back I don't think that heuristic ever steered me wrong (even at a company that is now a "unicorn")

from experience: I am very big on transparency and honesty and while that feels good and no one ends up surprised, the problem you run into is that other companies are not particularly honest or transparent. I would not change what we did (which was basically full disclosure) but it was challenging to deal with.

Would a sensible compromise be to disclose anything that you would have to disclose if you were a public company instead of a private one?

Re: My company sold for $100M and I got zilch – how can that be?

#346

Post by mattmaroon »

vanniv wrote: post #307
mattmaroon wrote: post #295

Earlier quoted context omitted.

But what if your competitor is willing to lose lots of money on large amounts of invested capital until you are out of business? Uber and Lyft have it tough in that regard. At the end of the day they've got product market fit in a profitable industry. I mean the very worst case is they become more efficient cab companies, and cab companies have been making money for a very long time. Their prices are artificially low…

Then you have a lousy business model, and you aren't going to make lots of money, and you aren't going to create lots of value, and, as a result, probably won't get a massive payout.

I don't think that's true. Uber's business model is the same as every cab company, but better. It's just a temporary problem (competition forcing them to sell below market value) that they need to overcome.

Their financial struggles are due to them pricing well below what taxi cabs do. But if Uber priced the same as cabs they'd still be an infinitely better service and make lots of money, once Lyft isn't there undercutting.

It reminds me a lot of airlines. They were all hemorrhaging money similarly, even for a decade or two after deregulation, until they consolidated down into a few and raised prices.

Re: My company sold for $100M and I got zilch – how can that be?

#347

Post by H8crilA »

gnicholas wrote: post #329
H8crilA wrote: post #311

Earlier quoted context omitted.

Salary negotiation (which is what this is) is not the time to be super polite and dance around important topics.

Actually, it wasn't salary negotiation because it was pre-offer. It was during an interview, and the author lamented that " She didn’t get a call-back ". I agree that during salary negotiations it is less important to tiptoe around things. Perhaps it was a bit premature to have even inquired about the cap table in any way during an interview, unless the interviewer had just mentioned how many options would be offered…

Discussing your stock/option grant is salary negotiation, even if it happens out of the standard order :)

Re: My company sold for $100M and I got zilch – how can that be?

#348

Post by user5994461 »

chipotle_coyote wrote: post #258
user5994461 wrote: post #214

Earlier quoted context omitted.

Not sure if you mean now or a few years ago. Either way, don't believe all the stripe marketing hype. I was working at a small startup circa 2015, around 100 employees. We looked carefully into payment providers to try to reduce costs. Turns out Stripe was very small, we would be their main customer with a 2 digit percentage of all transactions if we moved our payments through them. Stripe had (has?) few customers an…

While it's hard to get confirmed metrics on Stripe given that they're private, it strikes me as unlikely that a 100-person startup would have been Stripe's "main customer" in mid-2015. Analysts estimated their annual revenue to be $450M that year based on a payment volume of $20B, with customers that at that point included Lyft and Slack.

Stripe was in the order of $10B in the previous year and we were above $1B. We were doing well for a small company, can't deny that, but ultimately that's all pocket money when it comes to payments or large companies.

Lyft and Slack were much much smaller back then, also private companies that don't publish any numbers. Not exactly great references at the time.

If you have to learn something from this, it's that Stripe is a long term play, that really needed the capital to sustain and grow the business. The main growth factor by the way is the second-order effect of growing with their customers, and they're very smart to advertise to the HN crowd.

Re: My company sold for $100M and I got zilch – how can that be?

#349

Post by jeremyjh »

superqd wrote: post #325
jeremyjh wrote: post #187

Earlier quoted context omitted.

I think if a venture is unsuccessful employees shouldn't expect to make money from their options. A venture that raises $60MM and sells for $100MM 4 years later is a failure. Making nothing in a case like that seems fair to me. What is perhaps unfair, is if the employee worked for substantially below market wages all of that time, and particularly if they were given a much rosier picture than was accurate. But we sho…

I think the problem is that it's often difficult to pinpoint the crux of the unfairness, but still feel it all the same. In my opinion, the unfairness is engendered by the realization that time and money are merely different units of the same thing. Which means the investors are getting guarantees on their invested time, but the folks who did all the work are completely unable to recoup any of the time they invested.…

If the worker is paid for their time, they aren't owed anything for it. If they are taking below market - as I said that may be unfair - then at most their investment is the delta to market compensation.

Also, investors puts in all the money upfront; there is a concept called time value of money that applies here, and what it means is that money paid upfront is worth more than a distribution of the same amount over time. The higher the cost of borrowing (cost of capital), the more valuable that upfront investment is.

Re: My company sold for $100M and I got zilch – how can that be?

#350

Post by brianwawok »

harryh wrote: post #131

FWIW, I kind of don't believe that this question is real. Questioner clams that he is a VP but also: > He has no idea how liquidation preferences work > He was "told" that the company was being acquired (instead of being involved in the sale) > No one at the company walked him through how his stock was valued, even after the acquisition. To the point that he thinks he needs to hire a lawyer. It's a fine question to u…

Most people I know who work in startups don’t know this stuff. Most people I know that run startups do know this. The knowledge gap is huge.
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