On one hand, being bought for $3B. On the other hand, joining Walmart.
(Sorry, could not help but being a bit redditish about it.)
Confirmed: Walmart buys Jet.com for $3B in cash
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Re: Confirmed: Walmart buys Jet.com for $3B in cash
#62What's the likely scenarios for an employee whose been there for 2 years, an employee whose been there for 1 year, and an employee whose been there for 6 months? If we assume 1 year cliff on options.
Great question. The answer is the same for all of them: roughly 0. Jet's last valuation was $1.6bn and it was, and continues to, burn cash like crazy. Investors aren't dumb, they see that. So they add a terms to their investment whereby they guarantee a return on their investment. For a company that needs hundreds of millions of dollars and is trying to beat Amazon? Let's say 3x. That means that if I put in $100m dol…
This is a badly inaccurate description of how liquidation preferences work, both mechanically and also with respect to what's "market."
First, it's exceptionally unusual to see anything more than a 1x liquidation preference (i.e. investors receive their initial investment back before anyone else gets paid) among well-funded companies. It's somewhat common to see a 6-10% interest rate added on top, but a 3x liquidation preference is the VC equivalent of a payday loan.
The other component is whether the liquidation preference is "participating" or "non-participating." The easiest way to think about that is that a participating preference receives its initial investment back out of the sale proceeds, then shares in the remainder of the profits alongside the common stockholders. A non-participating preference is like a "greater-of" - basically downside protection in the event that the company is sold for a much lower than expected amount.
Suppose Jet's received $800m in funding like you said, and suppose the investors have gotten pretty aggressive terms - call it 6 rounds of funding that each took 20% post-money, all of which have a 1x liquidation preference and are getting 10% interest. Let's say the interest takes the preference to $1 billion because we're more or less making up numbers at this point, but we're in the right ballpark.
So the common stockholders (founders and employees) own 26% of the company at this point (.8^6), and a billion dollars comes off the top of the $3 billion sale amount. The common stockholders would therefore receive about $520 million.
The Walmart stock is publicly traded, so it's a lot like getting cash (though it may be subject to a short lock-up in a deal like this). Companies like to do combination cash/stock deals for a variety of reasons.
Re: Confirmed: Walmart buys Jet.com for $3B in cash
#63I really hope Walmart doesn't scrap the Jet Anywhere cash back program [0]. It seems not well known and somewhat controversial, but offers generous rates higher than everywhere else. For example, 4.8% from Expedia, 5.6% from Orbitz. Unlike every other cash back program they do not cap the amount for flights. JetCash is effectively real cash because many items are available cheaper than even from Walmart, Amazon, or C…
They cap the total you can get in a year at $1000.
Re: Confirmed: Walmart buys Jet.com for $3B in cash
#64What's the likely scenarios for an employee whose been there for 2 years, an employee whose been there for 1 year, and an employee whose been there for 6 months? If we assume 1 year cliff on options.
Usually for large acquisitions like these the employees are kept on the same vesting schedules they were already on (especially if the company is so young). There is probably additional stock options issued for retention on top of this. So, if you have been there for 2 years, you are probably 50% vested, 1 year 25% etc. Typically if you have not reached your cliff, it is kept in place.
There are some circumstances where in a big acquisition like this founders or key employees are asked to re-start the vesting clock on their shares. This is more common in small buys but can happen in big ones too. In this case you get some payout for e.g. the 2 years you were there and then the rest of your stock (and maybe a refresher) get spread over 3 or 4 years.
In terms of payout, if you assume by series C that 50-75% of the company was sold to investors then $1.5B to $2.25B will go to investors and the remaining 750 million to $1.5 billion goes to founders and employees. Obviously this is a huge range and you need the cap table to know what really happened.
Re: Confirmed: Walmart buys Jet.com for $3B in cash
#65Earlier quoted context omitted.
Great question. The answer is the same for all of them: roughly 0. Jet's last valuation was $1.6bn and it was, and continues to, burn cash like crazy. Investors aren't dumb, they see that. So they add a terms to their investment whereby they guarantee a return on their investment. For a company that needs hundreds of millions of dollars and is trying to beat Amazon? Let's say 3x. That means that if I put in $100m dol…
If no employees get anything, why wouldn't they organize and threaten to quit together (leaving Walmart buying the name, a founder or two and some technology with nobody to run it) to try to stop the deal? Isn't the whole idea of accepting 1/2 salary at a start-up because of your glorious equity? Whenever I hear about these "deals" where employees end up with nothing or close to nothing, I wonder what they are thinki…
I've met plenty of startup employees who've spent years educating themselves about programming and <10 minutes reading about equity, stock options, etc.
Re: Confirmed: Walmart buys Jet.com for $3B in cash
#66On one hand, being bought for $3B. On the other hand, joining Walmart. (Sorry, could not help but being a bit redditish about it.)
What's bad about Walmart?
Re: Confirmed: Walmart buys Jet.com for $3B in cash
#67Is anyone here using Jet on a regular basis? I tried it once a few months back and dismissed it as nothing innovative enough to be a sustainable Amazon competitor. I must have been very wrong. I don't see how Jet justifies 3B from Walmart. I will credit them on one point - They do seem have great employee sat that is a result of investing lots of time and energy to create a healthy environment.
I use them pretty regularly, since I discontinued my Amazon Prime membership. Amazon without Prime is a shipping fee quagmire. Jet is terrible for ordering books, but other than that they are pretty prompt on delivering stuff within 2 days. You get discount for using debit card (1.5%) and using a larger cart drops prices(which stops after you added a bunch of items).
Amazon also gives you free shipping once you spend above $49. And if you have a business account you get two day shipping as well at the same threshold.
Re: Confirmed: Walmart buys Jet.com for $3B in cash
#68Jet.com ran a contest where they gave 100,000 shares as the top prize for the most signup referrals. This Guy is probably one happy guy right now. He spent $18k and the value of those stocks are probably worth in the millions. http://www.businessinsider.com/jet-insiders-referral-program...
Pretty cool. While this is almost certainly in violation of general solicitation SEC regulations, I doubt there would be any action taken by the regulator. The surprising part is that Jet.com's legal department let this fly.
Why would this violate? They are giving a reward, no value implied or stated.
Re: Confirmed: Walmart buys Jet.com for $3B in cash
#69Earlier quoted context omitted.
It ain't HN without some good ol' cynicism.
It's what makes HN so great. Even the original Dropbox "Show HN" pitch was agressively cynical about it; "I can do the same thing with a linux box and some scripts...", etc.
Would love to see this post if you have it handy.
Re: Confirmed: Walmart buys Jet.com for $3B in cash
#70Earlier quoted context omitted.
Great question. The answer is the same for all of them: roughly 0. Jet's last valuation was $1.6bn and it was, and continues to, burn cash like crazy. Investors aren't dumb, they see that. So they add a terms to their investment whereby they guarantee a return on their investment. For a company that needs hundreds of millions of dollars and is trying to beat Amazon? Let's say 3x. That means that if I put in $100m dol…
If no employees get anything, why wouldn't they organize and threaten to quit together (leaving Walmart buying the name, a founder or two and some technology with nobody to run it) to try to stop the deal? Isn't the whole idea of accepting 1/2 salary at a start-up because of your glorious equity? Whenever I hear about these "deals" where employees end up with nothing or close to nothing, I wonder what they are thinki…
It's not likely anyone is accepting 1/2 their market salary. Lots of companies are paying top dollar market only to be slightly less than Google.