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CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

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Re: CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

#61

Post by FireBeyond »

ChuckMcM wrote: post #22
pyrrhotech wrote: post #12

And the average engineer who thought they'd be rich, probably owns 0.0002%. Have fun with your 200k! Startups are such a scam for the employees.

To add to this, so what if it is "$200K" ? Basically that is enough to completely cover one kids education at a state school, put down 20% on a million dollar house, or seed fund your next "big thing" for easily 6 to 18 months. On top of that you've been working for a salary that probably paid all your existing living expenses so you were not accumulating debt. That is a pretty cool thing. Further, if you continue to…

"put down 20% on a million dollar house" - maybe, or maybe not. Your bank might still look at it as a gift, and you still run into issues.

For example, Mike Davidson (founder of Newsvine) describes in a blog about building a $1.1M home after he sold to MSNBC (http://www.ahousebythepark.com/journal/archive/category/fina...):

"My credit is great and I have a strong cash position, but even so, getting a jumbo loan is seemingly 10x more difficult than it has historically been."

"Then, a whole two months into the process, they wanted me to go to my HR department and provide written compensation guarantees using language my HR department was not comfortable with (and neither was I, to be frank)."

"All this for someone who has perfect credit, a comfortable salary, plenty of equity in his property, and the ability to pay off the entire house tomorrow if necessary."

Re: CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

#62

Post by rahimnathwani »

thaumasiotes wrote: post #35
ChuckMcM wrote: post #22

Earlier quoted context omitted.

To add to this, so what if it is "$200K" ? Basically that is enough to completely cover one kids education at a state school, put down 20% on a million dollar house, or seed fund your next "big thing" for easily 6 to 18 months. On top of that you've been working for a salary that probably paid all your existing living expenses so you were not accumulating debt. That is a pretty cool thing. Further, if you continue to…

Using an unrepeatable windfall as the down payment on a loan seems wildly inadvisable. The point of the down payment is that you're able make good on the loan.

No. The point of the down payment is to reduce the loan-to-value ratio which, in turn, reduces the risk taken by the bank (as the property value would have to fall by more than the amount of the down payment before the loan collateral is worth less than the loan).

This risk reduction is why the bank will give you a loan at y% rather than 1.5y%. This reduces your monthly payments to an amount you can afford each month from your salary.

Re: CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

#63

Post by rodgerd »

ycmike wrote: post #9

I agree with the article that since startups are pass/fail, the founders must due whatever they have to do to succeed. Marc Andreesen says to even take that highly diluted fourth round to get to product/market fit and increase your chances of success. http://www.stanford.edu/class/ee204/ProductMarketFit.html

"Venture capitalist says you should always follow his business plan" non-shocker.

Re: CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

#64

Post by FireBeyond »

pyrrhotech wrote: post #54
psychometry wrote: post #39

Earlier quoted context omitted.

I'm curious what kind of warped perspective allows someone to scoff at a $200,000 windfall and where I can acquire such a perspective.

are you serious? How much do you make? Remember we are talking $200k pretax. So maybe $120k after taxes. That's less than half a down payment on a shit house in this area. That's maybe one year of market value cash compensation for an engineer with 5 years experience. I'm not saying it's nothing, but remember that we are talking about this being one of the rare startup equity "success stories" that you hear about so…

"So maybe $120k after taxes. That's less than half a down payment on a shit house in this area."

As of 2013, the average downpayment on a house is 16%, with a benchmark of 20%. So we'll go with the lesser, as "less than".

So I can probably presume you're likely living in the Valley or NYC if your viewpoint is that $750K will buy you a "shitty house".

Based on assumptions, admittedly, say you own a $1M house (as scoffing at a $750K house as 'shit'...), with a healthy downpayment of $200K (see above) leaves you paying about $5,000/month on an $800K 30 year mortgage.

So, we add that to your savings of $6,600 a month, and we look at a calculator of front end ratios and we arrive at you making about $250K+ a year. Of course, most people at that level of income are not living like paupers in their million dollar houses, savagely squirreling money away (as $250K minus $11.6K/month for mortgage and savings only leaves $2,300/month for car(s), bills, entertainment, etc), so it's probably a reasonably safe assumption that it's at least $300K.

It's interesting your perspective that you wouldn't consider yourself 'wealthy' unless you had (either) $6M in savings, or a (household?) income of $10M+ / year, when in reality, "You are the 2%".

Re: CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

#65

Post by FireBeyond »

rahimnathwani wrote: post #62
thaumasiotes wrote: post #35

Earlier quoted context omitted.

Using an unrepeatable windfall as the down payment on a loan seems wildly inadvisable. The point of the down payment is that you're able make good on the loan.

No. The point of the down payment is to reduce the loan-to-value ratio which, in turn, reduces the risk taken by the bank (as the property value would have to fall by more than the amount of the down payment before the loan collateral is worth less than the loan). This risk reduction is why the bank will give you a loan at y% rather than 1.5y%. This reduces your monthly payments to an amount you can afford each month…

As I mentioned down thread, it's not that easy. Mike Davidson, who sold Newsvine to MSNBC and had enough liquid cash to (more than) cover his mortgage that day in its entirety still went through hoop after hoop even refinancing his loan.

Risk is only a part of the equation here.

Re: CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

#66

Post by FireBeyond »

pyrrhotech wrote: post #54
psychometry wrote: post #39

Earlier quoted context omitted.

I'm curious what kind of warped perspective allows someone to scoff at a $200,000 windfall and where I can acquire such a perspective.

are you serious? How much do you make? Remember we are talking $200k pretax. So maybe $120k after taxes. That's less than half a down payment on a shit house in this area. That's maybe one year of market value cash compensation for an engineer with 5 years experience. I'm not saying it's nothing, but remember that we are talking about this being one of the rare startup equity "success stories" that you hear about so…

Except I also read in other threads that you comment on spending $5/day on food. And not living in SF because you can't or won't afford to.

So it is entirely possible that you are min-max'ing your life goals in an outlier fashion (which is your perfect right, don't mistake me).

Re: CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

#67

Post by ycmike »

dclowd9901 wrote: post #41
ycmike wrote: post #9

I agree with the article that since startups are pass/fail, the founders must due whatever they have to do to succeed. Marc Andreesen says to even take that highly diluted fourth round to get to product/market fit and increase your chances of success. http://www.stanford.edu/class/ee204/ProductMarketFit.html

That's because mark andreesen has the investment money to benefit from you making that choice.

Again startups are pass/fail. So what can he benefit if they fire you and bring some professional CEO who tanks the company? The truly big outcomes come from the founder who stays and does well (Apple, Google, Facebook, etc) That is why they stared Andreesen Horowitz http://www.bhorowitz.com/why_we_prefer_founding_ceos

Re: CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

#68

Post by ycmike »

rodgerd wrote: post #63
ycmike wrote: post #9

I agree with the article that since startups are pass/fail, the founders must due whatever they have to do to succeed. Marc Andreesen says to even take that highly diluted fourth round to get to product/market fit and increase your chances of success. http://www.stanford.edu/class/ee204/ProductMarketFit.html

"Venture capitalist says you should always follow his business plan" non-shocker.

What he says is you should get to product/market fit. If you don't get there then whatever business plan you have will fail and so will you. When Aaron dilutes himself massively he does so to buy time to get to product/market fit. Only by dong so can he later turn on the growth engine and know that users will stay and love the product. A top VC knows that he can never trick a founder into making him a large exit. The founder just needs the "right" plan, not "his" plan.

Re: CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

#69

Post by sbilstein »

psychometry wrote: post #39
pyrrhotech wrote: post #12

And the average engineer who thought they'd be rich, probably owns 0.0002%. Have fun with your 200k! Startups are such a scam for the employees.

I'm curious what kind of warped perspective allows someone to scoff at a $200,000 windfall and where I can acquire such a perspective.

200k over 4 year vest for an engineer with a handful years of experience is far from unheard of in stable publicly traded companies in the valley.

Re: CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

#70

Post by rahimnathwani »

FireBeyond wrote: post #65
rahimnathwani wrote: post #62

Earlier quoted context omitted.

No. The point of the down payment is to reduce the loan-to-value ratio which, in turn, reduces the risk taken by the bank (as the property value would have to fall by more than the amount of the down payment before the loan collateral is worth less than the loan). This risk reduction is why the bank will give you a loan at y% rather than 1.5y%. This reduces your monthly payments to an amount you can afford each month…

As I mentioned down thread, it's not that easy. Mike Davidson, who sold Newsvine to MSNBC and had enough liquid cash to (more than) cover his mortgage that day in its entirety still went through hoop after hoop even refinancing his loan. Risk is only a part of the equation here.

I was responding to a parent comment: "The point of the down payment is that you're able make good on the loan."

I don't agree with that statement, as I believe the primary purpose of the down payment is a source of risk reduction for the lender, whose only guaranteed recourse is the collateral on the loan. In the UK, home loan products each have max LTV (loan-to-value) thresholds, and prices are inversely related to those (though not linearly of course). Lenders don't care whether the LTV being less than 100% is the result of years of saving, a gift from parents, a windfall of some kind, or just because you happened to make money when you sold your previous property. They care mainly about the LTV (which affects their downside risk) and the ratio of your regular monthly income to the monthly payments (to make sure you can comfortably afford the repayments).

Do you disagree with my statement, or are you just pointing out that the down payment is only one of the factors which affects the risk of the loan, and that the risk of the loan is only factor which affects the lender's decision?

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