Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

FanDuel founders to receive no cash from sale to Paddy Power Betfair

heraldscotland.com

Post reply on HN
Print view View original

71–80 of 187 posts

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#71

Post by ericb »

segmondy wrote: post #66

Gee, not even $500k or a mil? My heart breaks for them. This is why VC's are called vultures. They claim they want you to have skin in the game, yet the founders get screwed. I know folks are thinking but the VCs are not making much, so what? Their entire game is to make it all up from another startup 100x which is why they take massive equity for $$$ invested.

Arguably, this is why this may be a foolish move for them. If the next 100xer avoids them based on a history of penny pinching on non 100x deals, they've been penny wise and pound foolish.

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#73

Post by slededit »

beager wrote: post #51
JumpCrisscross wrote: post #5

TL; DR FanDuel was sold for less than its liquidation preference, so common stock holders got nothing.

Just want to say thanks for jumping all over this comment thread to explain liquidation topics and scenarios. I'm alarmed how much folks who get into startups don't understand these things, and lament how much I still don't know about it all. Then again, so much of startup culture actively conspires to make deal structure/cap tables/liquidation preferences opaque, because nobody wants to say "Hey, come work for this…

If a deal is complicated it's to screw you over. I think people would be surprised at how much of the economy runs on handshake deals.

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#74

Post by Gibbon1 »

hn_throwaway_99 wrote: post #70
greglindahl wrote: post #35

Earlier quoted context omitted.

If you like lower risk and lower gain, sure. The most important thing is being educated. Every time this topic comes up on HN it appears that many people are unaware that liquidation preferences are a thing and many sales that are down-rounds have no money falling on common.

> If you like lower risk and lower gain, sure. Given how much the big tech companies are paying though, especially when it comes to RSUs, I'm not sure this calculus makes sense anymore, especially for early employees. Founders may do exceptionally well on many cases, but for most early employees at startups there really isn't that much potential upside in most cases, compared to the guaranteed earnings you can get at…

My take is over the last 30 years the return for early employees has become progressively worse. To the point where the best case scenario you only break even vs a traditional job.

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#75

Post by evgen »

yummybear wrote: post #61
WheelsAtLarge wrote: post #53

Just because you founded a company, it does not mean you get a cut of the final sale. Starting a company is hard. You can struggle to make it profitable, never get there, and end up deeply in debt years later. Fanduel became relevant mainly because of the marketing it was able to purchase without that it would have fallen by the wayside. You need lots of money for that. The founders must have needed cash at a critica…

Well yeah, legally - financially. Still, it doesn't seem "fair".

It may not seem 'fair', but the reality is that the company that the founders had equity in died in the 2015 round of financing. It was replaced with a company which needed to make a big bet (lots of ad spending) to stay strong in this particular market and the bet did not pay off. If you take $200M+ of financing then the people writing the check are expecting you to exit no lower than $1.5B -- ~$500M is, to use the parlance of this particular company, a single when the team needed a home run.

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#76

Post by lallysingh »

yummybear wrote: post #61
WheelsAtLarge wrote: post #53

Just because you founded a company, it does not mean you get a cut of the final sale. Starting a company is hard. You can struggle to make it profitable, never get there, and end up deeply in debt years later. Fanduel became relevant mainly because of the marketing it was able to purchase without that it would have fallen by the wayside. You need lots of money for that. The founders must have needed cash at a critica…

Well yeah, legally - financially. Still, it doesn't seem "fair".

Can the founders fairly ask for a cut of proceeds they didn't contribute to? It was the marketing money spent, not the engineering or the idea that made the business saleable. So the people that put their money at risk get their return (7% - barely more than a money market account), and the founders get salary.

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#77

Post by sokoloff »

opportune wrote: post #43
hluska wrote: post #37

Earlier quoted context omitted.

From the perspective of a founder, I would be quite nervous about accepting an investment and drawing any kind of salary if the deal didn't include liquidation preferences. They are so standard (at least in North American tech) that if they were missing, I'd worry about their competence. Structuring a deal without LPs would mean that founders could push for extremely early exits, cash out with modest (though life cha…

I posted this in another reply, but it’s not the liquidation preferences themselves so much as the fact that it was the investors pushing for liquidation at a price point that precluded the founders from getting any money

Isn't that a bit like asking why they sold for $465M instead of demanding $930M? Presumably, they sold for the highest amount they could get. If the company falls off the hockey stick, there may be no better time than right now to sell it for what you can get.

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#78

Post by olliej »

Bahamut wrote: post #11

Stories like this seem to validate that people should choose real liquid equity of public companies over the paper equity of startups when considering employment.

I made a comment along those lines on HN a few years ago, and was told in no uncertain terms that I was unrealistic in expecting to be paid my worth unless I accepted payment in lottery tickets/stock-with-no-guaranteed-conversion-clause.

This article further affirms my position: it’s not just founders that got no payout, the employees didn’t either. Cool beans, you work your ass off for a company at below market rates with the promise that you’ll get a big payout when it sells, and then it turns out even when it sells for half a billion your stock is worth nothing. This isn’t the lottery of “the company may fail” this is the lottery of “I hope VC doesn’t rewrite the charter to ensure that we don’t get paid”. Oh, and the CEO alone got 11million. That sounds like there was plenty of money available

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#79

Post by olliej »

greglindahl wrote: post #35
Bahamut wrote: post #11

Stories like this seem to validate that people should choose real liquid equity of public companies over the paper equity of startups when considering employment.

If you like lower risk and lower gain, sure. The most important thing is being educated. Every time this topic comes up on HN it appears that many people are unaware that liquidation preferences are a thing and many sales that are down-rounds have no money falling on common.

Just to clarify: how educated do you need to be? Founders don’t appear to be obligated to tell you when they make deals that effect you, and more importantly retroactively reduce how much they paid you.

If you are paid in stock, and the founders make a deal that reduces the payout value of that stock (in this case to zero) they have stolen from you in a way that has no recourse. Literally they paid you with something that was presumably claimed to have value, and then after a few years made deals that made that worth less. Even though you had already been “paid”.

How much education can you do that would protect you from this?

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#80

Post by opportune »

sokoloff wrote: post #77
opportune wrote: post #43

Earlier quoted context omitted.

I posted this in another reply, but it’s not the liquidation preferences themselves so much as the fact that it was the investors pushing for liquidation at a price point that precluded the founders from getting any money

Isn't that a bit like asking why they sold for $465M instead of demanding $930M? Presumably, they sold for the highest amount they could get. If the company falls off the hockey stick, there may be no better time than right now to sell it for what you can get.

$465M was right at the point where investors still got ROI while investors got nothing. It’s not like they took a loss. If I were a founder I would be beyond pissed that the investors sold right in the band where they made money but not the founders and employees. Granted, I don’t know the exact terms of their contract nor the full context
Post reply on HN