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Sell for half a billion and get nothing (2021)

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Re: Sell for half a billion and get nothing (2021)

#71

Post by mil22 »

Analemma_ wrote: post #21
jmward01 wrote: post #14

I have a friend that has given up on options. Even if he were to be #10 somewhere he would take any extra pay over any options. Stories like this show the wisdom of that. Are there really that many success stories for people other than for VCs and (maybe) founders out there anymore? Even if your options (eventually) get you 200k, how much did they cost you in years of lower pay. Even with a payout, considering intere…

It's not just your friend: a lot of people have given up on options. Obviously they're underrepresented here on HN because this is a startup-focused forum, but I know many, many people who have concluded "options have an EV of zero, startups pay options in lieu of market-rate salary, therefore startups are a raw deal; I will only go to FAANGs". They're sort of a dark matter universe since they are only visible in the…

I'm in this category, except became an invisible solopreneur after deciding startups are a raw deal instead of going back to FAANG. Between the unfavorable tax treatment, long time to IPO, the inherently high risk of options, it's just not worth it. Perhaps a good deal for the VCs, maybe for the founders, but not for even the earliest employees. See you in the next life.

Re: Sell for half a billion and get nothing (2021)

#73

Post by bionsystem »

jv22222 wrote: post #62

> Lessons Learned: Build a Very Fundable Startup > Every founder should learn from this disastrous scenario the importance of building a very healthy, fundable startup. A healthy, vibrant startup draws more investors during fundraising. The competition gives founders the leverage to negotiate for more founder-friendly terms. Healthy startups get better valuations, better terms, and raise funds with much less effort.…

It's still better to have 10% of a billion rather than 100% of a million. It's just that "valuation" is only one of the metrics that really matters, and selling your equity has to be done progressively and by reading the small prints in every file. It's sad that startup founders have become so good at raising money that they forget that a path to profitability + understanding the actual financials (beyond just valuation) matters.

Re: Sell for half a billion and get nothing (2021)

#74

Post by paulddraper »

Finbarr wrote: post #65
paulddraper wrote: post #63

Earlier quoted context omitted.

That is the standard and anyone not in a firesale should expect that m But the reason you raise is because you can turn each dollar into 1+ dollars of enterprise value. If you raise and don't spend... You've accomplished nothing except throwing some money at lawyers.

Sure- the happy case with VC is that companies raise and spend the money to make more. The reality case is that many companies struggle to do that, and will burn a ton of money in the process, making the liquidation preference much more painful.

That's right. Raising money raises the stakes.

It raises the ceiling but also the floor.

Be careful of getting buried.

Re: Sell for half a billion and get nothing (2021)

#75

Post by eastbound »

jmward01 wrote: post #14

I have a friend that has given up on options. Even if he were to be #10 somewhere he would take any extra pay over any options. Stories like this show the wisdom of that. Are there really that many success stories for people other than for VCs and (maybe) founders out there anymore? Even if your options (eventually) get you 200k, how much did they cost you in years of lower pay. Even with a payout, considering intere…

> Are there really that many success stories for people other than for VCs and (maybe) founders out there anymore?

I was the employee around #300 at Atlassian, the founders didn’t dilute the employees, and my options netted $3m (minus the taxes) after working there for 3 years and waiting 6 years.

Scott Farquhar and Mike Cannon-Brookes were hell-bent on being honest, fair and giving back. There are good people out there.

Re: Sell for half a billion and get nothing (2021)

#76

Post by b112 »

justinlloyd wrote: post #45

I am currently working with a start-up where the company is incapable of meeting its capex obligations. The founder raised a good amount of capital from investors a few years ago, and that provided a decent runway, but there's no traction, no KPIs, and whilst we've built some impressive technology, impressive technology does not bring in revenue. One of the problems (amongst many) is that the primary stakeholder has…

I think you're in a same-same path with this.

That is, If you say "No, I don't want equity", they still owe your back pay, there are multiple ways to get it, AND if either "back pay" or "equity" is to have value, they must have more funding. Which means, out of that funding can immediately come your back pay.

So if you take the equity, or insist on pay, both are the same in the end.

In fact, by not showing you what you need to know? They're forcing you to go after any investment they get for backpay.

I've always found, in every single case, if someone doesn't want to show me something? It's because they know they're scamming you. Or selling false goods.

No one with a sensible, reasonable deal ever desires to hide what the deal is.

In fact, you should most insist and see what the founders are getting too. And the older investors. But either way, you are 100% owed salary, without dilution, and in most jurisdictions employee wages are class A, come first, before anyone gets cash -- investor or not.

Is this the case in your region?

Re: Sell for half a billion and get nothing (2021)

#77

Post by brycelarkin »

bionsystem wrote: post #73
jv22222 wrote: post #62

> Lessons Learned: Build a Very Fundable Startup > Every founder should learn from this disastrous scenario the importance of building a very healthy, fundable startup. A healthy, vibrant startup draws more investors during fundraising. The competition gives founders the leverage to negotiate for more founder-friendly terms. Healthy startups get better valuations, better terms, and raise funds with much less effort.…

It's still better to have 10% of a billion rather than 100% of a million. It's just that "valuation" is only one of the metrics that really matters, and selling your equity has to be done progressively and by reading the small prints in every file. It's sad that startup founders have become so good at raising money that they forget that a path to profitability + understanding the actual financials (beyond just valuat…

I’d rather take 100% of a million than Fan Duels’ 0% of half a billion.

Re: Sell for half a billion and get nothing (2021)

#78

Post by whiterknight »

justinlloyd wrote: post #45

I am currently working with a start-up where the company is incapable of meeting its capex obligations. The founder raised a good amount of capital from investors a few years ago, and that provided a decent runway, but there's no traction, no KPIs, and whilst we've built some impressive technology, impressive technology does not bring in revenue. One of the problems (amongst many) is that the primary stakeholder has…

Are we working at the same company? :)

Re: Sell for half a billion and get nothing (2021)

#79

Post by dvko »

wly_cdgr wrote: post #52

LOL @ the idea that the investors are the ones who take on the largest risks. Investors barely deserve 1x, never mind anything higher.

I’m a bootstrapped founder but hard disagree with this take.

Surely it can’t be the founder taking home a healthy salary from day 1 despite the company being far away from any revenue at all that is taking the risk in your book?

Re: Sell for half a billion and get nothing (2021)

#80

Post by wdh505 »

aetherspawn wrote: post #66
jv22222 wrote: post #62

> Lessons Learned: Build a Very Fundable Startup > Every founder should learn from this disastrous scenario the importance of building a very healthy, fundable startup. A healthy, vibrant startup draws more investors during fundraising. The competition gives founders the leverage to negotiate for more founder-friendly terms. Healthy startups get better valuations, better terms, and raise funds with much less effort.…

Yeah I have a small business and I sway strongly towards being contempt with letting the business grow at its own rate. No, it won’t have a 1 bil payout, but you make your own rules and you’ll get a healthy cash out from the dividends after only 1 year or so. It also forces you to keep pivoting and finding a cash cow rather than assuming your initial plan was any good. We’re on like plan #10 now and in hindsight if w…

Contempt is not equal to content. I think autocorrect got you
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