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At Booming Toptal, No Stock for Employees or Investors

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Re: At Booming Toptal, No Stock for Employees or Investors

#41

Post by henryfjordan »

nostrademons wrote: post #28
larrik wrote: post #23

How does he avoid it being a Sole Proprietorship and being on the hook personally for any lawsuits against it?

You can have a one-person corporation where the founder is the sole shareholder, officer, and employee and still be protected from legal liability. A very large proportion of LLCs are in exactly this category, as well as a decent number of S- and C-corps. You just have to file the appropriate articles of incorporation, continue paying your taxes, and make sure that company business is done in the company name out of…

Don't forget throwing yourself a little "shareholders meeting" every year!

Re: At Booming Toptal, No Stock for Employees or Investors

#42

Post by StriverGuy »

tschwimmer wrote: post #12

A lot of Sillicon Valley startup fundraising ends up resembling an iterated prisoner's dilemma. Most startups fail and it's likely that you might have to work with people a few times before you get it right. The [generally] dominant strategy for Iterated Prisoner's dilemma is tit for tat[0], and consequently you see a lot of people cooperating when when it might be more lucrative to defect is because they know that t…

Certain business models require high amounts of capital in order to create leverage/growth. Think of Uber, WeWork etc. All the founders made out fabulously rich due to the ability to leverage growth on the back of VC money. Organically growing, profitable business may never need to take outside money. It really comes down to the market and growth strategy.

Re: At Booming Toptal, No Stock for Employees or Investors

#43

Post by henryfjordan »

bdcravens wrote: post #38
1123581321 wrote: post #29

Earlier quoted context omitted.

It’s still a separate legal entity. Sole proprietorship means there is no corporation, just a person doing business with their own assets and getting paid directly.

You can't just setup a corp and get immunity - that's a popular myth. There's many ways you can "pierce the corporate veil". However, as long as the company has officers, has all their paperwork in order, etc, it's a legit corp (regardless of how many investors there are)

You absolutely can just set up a corp and get immunity. Piercing the corporate veil is hard and requires hard proof that corp is a sham. The courts even respect obvious abuse of the system so long as the paperwork is done correctly (see https://en.wikipedia.org/wiki/Walkovszky_v._Carlton).

All you have to do is follow the rules and your corp is valid.

Re: At Booming Toptal, No Stock for Employees or Investors

#44

Post by zawerf »

bnt wrote: post #8

I think the article misses the point: are we now in an era where you actually expect to get stock when you join a company? As a former Toptal employee: IMHO the co-founder in question was widely regarded as a horrible manager, often pushing people to burnout and generally imposing a culture of secrecy and mistrust. The VPs they ousted were nothing better. I personally went through several burnouts while there, but al…

I don't know if it's still true, but Netflix supposedly offers a really high base salary with no equity. I think the logic is that you can just buy the stock yourself with the higher salary if you believed in the company enough to want equity.

Re: At Booming Toptal, No Stock for Employees or Investors

#45

Post by staticautomatic »

scarmig wrote: post #22
bilbo0s wrote: post #19

Earlier quoted context omitted.

I don't know man? Just Devil's Advocate here, but as an employee going into a startup it's kind of well known at this point that you're only likely to get what's written in black and white. Would you go to work for a company that promises to start paying you at "sometime in the future"? I kind of agree with WheelsAtLarge, you had to have known what you were getting into. Personally, I wouldn't work for someone for fr…

Whenever I talk to new grads, I tell them to value their equity compensation at zero for a small startup, for exactly that reason. But, it's similar to a lottery: you should expect to lose, but an organization can't run a lottery and pocket the winnings itself under the pretext everyone should have known they were throwing away their money.

But that's not what happened here. It's not that they were told one thing but should have known to expect another. They were told one thing, and that one thing happened/didn't happen. It's totally cut and dried.

Re: At Booming Toptal, No Stock for Employees or Investors

#46

Post by DevKoala »

The company I work for is in the same situation, but no complaints from me since I understood early that I need to ask for high salary raises along with the option rewards, and not let the execs convince me to just take more options.

There have been talks of an IPO or acquisition for years, and hopefully, it happens, but they feel a bit like a carrot on a stick; the revenue goal for going IPO is always increasing.

Re: At Booming Toptal, No Stock for Employees or Investors

#47

Post by elsewhen »

staticautomatic wrote: post #20
elsewhen wrote: post #15

Earlier quoted context omitted.

Luring employees with promises of equity and then not delivering sounds like a bait and switch.

But they weren't lured with the promise of equity. The promise was that they'd get equity if there was a subsequent funding round . The investors, especially, have zero right to complain.

FTA: “I was told the conversion [of Toptal into a corporation] would happen in a number of months,” said Aaron Diek, who is based in central Texas and says he worked for Toptal in 2014 and 2015, when Toptal said it was generating $80 million in revenue per year. “I asked on a number of occasions, and the answer [from Du Val] was always ‘it’s coming, it’s coming.’

Re: At Booming Toptal, No Stock for Employees or Investors

#48

Post by novok »

tschwimmer wrote: post #12

A lot of Sillicon Valley startup fundraising ends up resembling an iterated prisoner's dilemma. Most startups fail and it's likely that you might have to work with people a few times before you get it right. The [generally] dominant strategy for Iterated Prisoner's dilemma is tit for tat[0], and consequently you see a lot of people cooperating when when it might be more lucrative to defect is because they know that t…

But now the strategy is known, it would be harder for everyone to get investors and employees to even agree to work with him for any conditional future promise of equity on something like investment.

Re: At Booming Toptal, No Stock for Employees or Investors

#49

Post by rolltiide »

He kept all his equity, we should be congratulating him for his acumen and prowess in negotiating this so smoothly.

Why are we glorifying giving a fraction of a fraction of a percent to employees who are going to be further diluted or totally zeroed out in any exit?

Why are we treating equity in other people’s hands as validation?

Offering convertible debt that converts into services or something else is a way of financing.

You don't need to aspire for a bunch of crunchbase entries.

There was a time when I thought different like “oh thats not a real seed round if the investors didnt do a share investment, or thats not a real series A” but now I know differently and primarily take a dim view on preferred shares, liquidity preferences and expensive capital - when acting as a founder or employee. Many ideas are more profitable exits for founders if there were no liquidity preferences.

Re: At Booming Toptal, No Stock for Employees or Investors

#50

Post by derefr »

marcinzm wrote: post #10
bnt wrote: post #8

I think the article misses the point: are we now in an era where you actually expect to get stock when you join a company? As a former Toptal employee: IMHO the co-founder in question was widely regarded as a horrible manager, often pushing people to burnout and generally imposing a culture of secrecy and mistrust. The VPs they ousted were nothing better. I personally went through several burnouts while there, but al…

>I think the article misses the point: are we now in an era where you actually expect to get stock when you join a company? If you join with the expectation of stock or are sold on stock as part of your package then yes. Based on the article, people were offered stock contingent on another funding round. That round never happened. If they were sold on promises of getting that stock and a round happening then they're…

> If they were sold on promises of getting that stock and a round happening then they're right to be pissed.

Does a statement of the form "you'll get X if condition Y" imply "we will seek condition Y so that you can get your X"? I don't think that it does.

For example: companies offer dividends if they make a profit. But that doesn't imply that the company will seek to make a profit in order to confer dividends. It's nice when they do, but there's no implied promise of working toward profitability just so that the dividend condition will apply.

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