Amazon bought Eero for $97M and employees still got screwed

I think what people expect in this situation is that they understand the equity agreement.

Startups consistently ask engineers to work extra hours "because equity," and then ask those same employees to trust the complex contracts.

Looks like a somewhat rigged/disingenuous system to me.

I'd imagine the founders and execs aren't needed or wanted outside of ensuring basic continuity of the business short term. But they negotiated benefits for themselves and not the other employees because they were the ones negotiating.

In these type of situations, all employees receive cash bonuses and "parachute payment" (total comp). I'm willing to bet the executives' compensation packages from Amazon are roughly 1 order of magnitude more than the average employee received. Foundational employees are likely sitting near 11-20 on the list getting remarkably fair packages that don't look too different form 1-10. If you stacked up all the employees total comp, it would most likely follow a normal distribution and probably aligns pretty closely to employee tenure and level.

I believe the article presents a false dichotomy: execs did well while early employees got shit. In reality, employees who were with the company at the time of the sale all fared similarly and comp looks essentially like it would if you dropped them all into similar roles at independently.

The people that lost out were investors.

The dichotomy is actually: people who invested money vs people who didn't. If you bought into eero, in this case, you lost money across the board. The only factor affecting investors was the liquidation preference between preferred and common stock, and the first-in-last-out payout priority for preferred stock (both of which are absolutely standard). Buying stock options has always been a lottery ticket. I don't think anything insidious happened here... not all companies are unicorns.

As the amount of risk in the equity increases, the expected value of the equity reduces to zero.

So anything that reduces the priority of employee equity vs that of the original employees and investors implicitly increases the risk in addition to the explicit reduction in face value.

The real problem to me has been the absurd notion that someone explicitly investing cash is somehow investing more on a dollar for dollar basis than regular employees.

* VC or whatever invests a dollar amount: they write a cheque.

* Employee invests a dollar amount: Employees at startups are expected to work 80 hours a week, so if we're assuming a regular job is 40 hours a week, then their salary should be twice their regular market rate salary. So in that case, an employee is making an annually recurring investment of (2 * market rate salary - actual salary).

In spite of this a VC or whatever gets priority on getting that money back, gets a say in the running of the company, ownership/dollar lower than "equity" grants to employees. The employee gets no voting rights, has a reduced payout priority, and on top of all of that even if the equity grants were equal, the employee is still taking more risk than the cash investors because the company is also their source of employment: if the company fails every one loses their investment, but employees have also lost their jobs.

So if anyone should get higher priority for divestment opportunities it should be employees - think of it this way: if you have 10 developers working for 100k, vs. a market rate of 150k, and they're working 80 hours a week, you are looking at a per-employee annual investment of 200k. If you have 10 employees, they are collectively investing $2million a year. That's getting super close to the "big" funding rounds (and for many cases more than) from various startups.

In response to the claim that they're not providing cash flow: if you were paying market rates, you would need to find a separate investor to raise cash for twice as many employees, all being paid more. That sounds like they're providing cashflow.