[HN Gopher] Windsurf employee #2: I was given a payout of only 1...
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Windsurf employee #2: I was given a payout of only 1% what my
shares where worth
Author : rfurmani
Score : 628 points
Date : 2025-07-24 17:15 UTC (2 days ago)
(HTM) web link (twitter.com)
(TXT) w3m dump (twitter.com)
| linotype wrote:
| I'm afraid behavior like this will only get more common and
| really shines a light on what a bad deal startups are for anyone
| but VCs and founders. Windsurf founders should be ashamed of
| themselves, but of course won't be.
| sublinear wrote:
| Buy the ticket, take the ride.
| jen20 wrote:
| But also understand who broke the ride in mid-air, and treat
| them with according levels of scorn in future.
| bachmeier wrote:
| Not much of a story here. The guy got a better offer and he took
| it:
|
| > I was given an offer that would explode same day. I had to
| forfeit all of my vested shares earned over my 3.5+ years at
| Windsurf.
| mitthrowaway2 wrote:
| It's still pretty shocking to have to forfeit shares that have
| vested.
| nocoiner wrote:
| It's like, what does vesting even mean?
|
| Was this a scenario where he lost them because some sort of
| "cause" event occurred, like leaving to work for a
| competitor? I can't imagine that would even be valid under CA
| law?
|
| I'm not even sure who was forcing him to forfeit his
| shares...
| SAI_Peregrinus wrote:
| Vest has two meanings: If it's a stock option, then it
| means you have the ability to purchase a share at a pre-
| determined price, no matter the current public price of the
| stock (or even if there is no public price). If it's a
| Restricted Stock Unit, it means you own that share.
| charcircuit wrote:
| The author refers to them as "my shares" which implies he
| has possession of the shares.
| brutuscat wrote:
| He should come to the UE to work on ... oh wait!
| TrackerFF wrote:
| Financially speaking, is it even worth joining a startup anymore?
| Compared to just going to any of the big companies. The latter
| will likely pay you more, with less risk involved.
|
| Seems like the best shot is to strive toward becoming financially
| independent, and then just go for the startup route and follow
| your passion. If you it doesn't work out, no big deal - if things
| turn out great, you'll just be even better off.
| absoluteunit1 wrote:
| > Seems like the best shot is to strive toward becoming
| financially independent, and then just go for the startup route
| and follow your passion.
|
| This is what I'm trying to do now. Having worked in startups
| and big tech; I think the best thing one can do is to attempt
| to forge their own path. For independence, financial gain and
| sanity
| BrawnyBadger53 wrote:
| It's generally not a good sign to me that this is the case.
| But I think you're right. Something needs to change to make
| startups feel more viable again.
| lovich wrote:
| Has it been worth it in a while? This is a legitimate question
| as I am on the east coast and wonder if it differs from the
| west coast environment.
|
| At least in my anecdotal experience, everytime I've entertained
| a startups offer in the past decade it's been either something
| like engineer #1, 3% equity and no you cannot see the cap table
| or other agreements with investors, or something like 10k units
| at 25 a share when we're on series z, and you lose them if you
| leave, and you can't sell for 6 months if you leave, and the
| investors have priority on payment if we sell for less than our
| valuation and yadda yadda yadda.
|
| I mentally just valued the equity as 0 in the compensation with
| all those limitations on liquidating them and never understood
| why anyone joined a startup
| xkcd-sucks wrote:
| Oh also there is the trick where the startup gets sold a
| little under its strike price and the execs each get signing
| bonuses > book value of company as sold
| marssaxman wrote:
| Was there _ever_ a time when you could reasonably expect to
| make more money by joining a startup? That has never been the
| case so far as I am aware, and I 'm currently on my seventh
| tour through startup-land...
| givemeethekeys wrote:
| It feels like it is worse now than it used to be. Back in
| 2010, you would be giving up a nice salary but not a much
| nicer salary by working at a startup.
|
| So, startup base compensation hasn't kept up, and the career
| and financial risk of working for one has gone up due to
| higher interest rate and higher open-market asset prices.
| antonymoose wrote:
| I did a startup circa 2010, early number employee, given
| our (failed) attempt and my equity I would have
| conservatively walked away with a $500k sum had the
| Founders' plans worked. That would have bought me a fine
| house in the nicest part of town with cash to spare.
|
| Having done two more, the best outcome I've seen is a 50k
| post tax payoff for 5 years of shitty startup conditions.
| Great, I got a down payment on a house now worth 800k.
|
| So that reason the best play, if you're not a founder
| doings cash out early, is to just play it safe in a big job
| and dock money away in equities and real estate.
| klooney wrote:
| Base salaries aren't terrible at startups, it's the RSUs
| and ESPP they can't match. I can deal with a terrible IT
| department preventing progress for double the money, it's
| fine.
| marssaxman wrote:
| I _really_ cannot, so - good for you! It takes all kinds.
|
| There is nothing I could do for pleasure, even with
| double my salary, which would compensate for the misery I
| would feel working a job I hated. But that's who _I_ am,
| and we 're not all the same!
| klooney wrote:
| It's not a terrible job that I hate, it's just sometimes
| you want to do something and you can't without a weird
| lobbying process.
| phendrenad2 wrote:
| It was always a bad deal. It was supported by urban legends
| of janitors and cafeteria workers getting seven-figure
| payouts because they negotiated a few shares of a company
| that went IPO and went "unicorn". But the reality was, most
| startup companies failed, and most shares became worthless.
| In 1995, 2005, 2015, etc. it was the same story.
|
| The only thing that changed recently is the "unicorns"
| stopped happening altogether.
| pinewurst wrote:
| The startup I did in the 90s provided me enough money to
| buy a car when they IPOed. Feh! Not worth the dreams I
| still have about having to return to working there.
| khuey wrote:
| More? Not really. But before Zuckerberg and the DOJ blew up
| the illegal wage fixing the big valley companies engaged in
| the gap was smaller.
| eweise wrote:
| Maybe way back in the .com days but its a terrible decision
| financially now.
| RainyDayTmrw wrote:
| 2010s startups were a lottery ticket with bad aggregate odds
| but real upside. If you wanted to make a risky bet, or if you
| believed you were better at picking winners than the rest of
| the market, there were some real opportunities to be had. If
| the new trend is a cabal of investors and executives
| hollowing out all the upside, in the rare event of a success,
| that's stark.
| pjmlp wrote:
| Outside US hardly, unless being one of the founders, because
| stuff like being given shares is not common.
|
| You will get a regular salary, with occasional performance
| bonus, just like any regular company, with all the action a
| startup requires.
| rexreed wrote:
| I am of the firm belief the solopreneurship is the future,
| especially with the power of AI. I don't believe corporations
| of any type, from startup to tech giant have the interests of
| anyone but the majority shareholders in mind. Employees,
| customers, partners, all get the shaft. When money is involved,
| startups aren't product companies, they're financial
| instruments.
| thedevilslawyer wrote:
| > Compared to just going to any of the big companies
|
| You're assuming someone joins a startup when they could join a
| big company. It's an exceptional occurrence.
| nevon wrote:
| I must be misunderstanding what he is saying, but I can't figure
| out what. Once his shares have vested, they are his. What entity
| forced him to sell his shares for 1% of what they are worth and
| how could they possibly do that?
| fragmede wrote:
| Whichever entity ended up buying Windsurf, the corporation.
| They get to declare the exchange rate, and for what. Sometimes
| it's cash, sometimes it's stock, usually it's some mix of both.
| nocoiner wrote:
| Where would the 99% haircut have come into play?
| wqaatwt wrote:
| Nobody willing to pay as much as OpenAI was offering
| initially? Of course that valuation was about as absurd as
| it gets...
| conartist6 wrote:
| Cognition made him a lightning offer it sounds like, valid one
| day only.
|
| I think if I understand what he is saying he could either stick
| with the product and team giving up the shares, or keep the
| shares and try his luck getting money for them another way.
|
| I appreciate that his choice shows that he is in it for the
| product and the team, but also ouch.
| shawabawa3 wrote:
| Google did a weird thing where they poached windsurf employees,
| licensed their tech and hired the CEO and upper management,
| leaving a shelled out company behind
|
| Looks like employees were given an exploding offer to join
| Google and sacrifice windsurf shares at a low valuation, or
| stick with windsurf
|
| If you stuck with windsurf you then joined cognition in a later
| acquisition
| nocoiner wrote:
| Wow. How did the Windsurf investors feel about that?
| lokar wrote:
| They got paid out as well. Meta pulled the same thing
| recently.
|
| So, a new trend where big tech "buys out" a startup in a
| way that only early VCs, founders and top managers get any
| value.
| sarchertech wrote:
| Seems like that makes options completely useless. If they
| had actual shares they could at least sue because
| majority shareholders have a duty not to completely screw
| over the minority.
| lokar wrote:
| It has always been possible (and sometimes happens) for
| VCs and mgmt to screw the early employees.
|
| The question is will it become more common now?
|
| Also, people equate these to aquihire deals. But they are
| not really. Most aquihire deals are when the company is
| out of runway, or it seems growth has slowed/stopped and
| there are no good ways out. There is not mucH value left.
|
| Here there is clearly billions in value, it's just not
| being distributed in the normal way.
| sarchertech wrote:
| It feels like it will become more common if Google gets
| away with this with no real backlash.
|
| I mean why would anyone honor employee options when
| buying out a company if you can just poach all the key
| employees and assets.
|
| As you said there was so much money involved. I can't
| think of a similar situation where employees were screwed
| out of billions like this.
| henryfjordan wrote:
| You can, and maybe should, exercise 1 option as soon as
| you get it to turn yourself into a shareholder.
| sundbry wrote:
| Sounds like a breach of fiduciary duty to the common
| shareholders.
| nocoiner wrote:
| Thanks for the response.
|
| It's breaking my brain a little bit that this isn't a
| straightforward breach of fiduciary duties to the
| corporation and its common stockholders. If an acquirer
| can deal with top management and holders of preferred
| shares, and scoop out the crown jewels of the
| corporation, then what's even the point of using a
| Delaware corporation to raise capital? Might as well just
| form a Nevada LLC using an LLC agreement that just says
| "good luck."
| churchill wrote:
| >Meta pulled the same thing recently.
|
| Do you mean the Scale AI acquihire? I took it at face
| value that Alex Wang just joined Meta, but come to think
| of it now, the company's just a husk of itself, customers
| no longer trust them, etc. So, it seems you're referring
| to Scale.
| lokar wrote:
| Yeah, that must be the one. What did other employees get?
| IncreasePosts wrote:
| Why would they give the CEO a bunch of money to join Google,
| but not employee #2? Is it possible the CEO is just worth way
| more for what ever reason?
| kevinventullo wrote:
| I reckon it has something to do with what % of the company
| was owned by the CEO vs employee #2.
| bigmadshoe wrote:
| Vested options can be voided when you leave a company, unless
| you want to exercise them.
| wmf wrote:
| It's not entirely clear, but I think Google/DeepMind _offered_
| him 1% of (what he thought) the shares were worth and then he
| refused and then the shares became worth almost nothing because
| Windsurf was just a husk of its former self.
| ThePowerOfFuet wrote:
| https://xcancel.com/premqnair/status/1948420769945682413
| hackermeows wrote:
| why would anyone work in startups as early devs anymore. Tell me
| what is the upside? There seems to be only downsides. Startup
| Fails , you loose - Gets acquired - you loose What is the
| motivation to perform .
| agartner wrote:
| Working on decently cool things with relatively limited
| bureaucracy.
| phkahler wrote:
| You can do that at established companies. If the cool thing
| comes to an end you'll often have a boring job you can keep
| or stay at while you find something else.
| mianos wrote:
| If you want to write new code and have a lot of influence over
| the overall implementation instead of fixing bugs on a years
| old steaming pile of tech debt.
|
| Not all places with large existing codebases are that bad, but
| if you are experienced, it can be very personally satisfying
| doing something well before it has degraded over time.
|
| I have worked in quite a few. One is a household name down here
| in Australia. I was the first engineer with the two founders. I
| worked 2 years 24/7 for half the salary I got when I left. I'll
| never get my money back but that's ok as I loved the time
| there.
| BoiledCabbage wrote:
| > There seems to be only downsides. Startup Fails , you loose -
| Gets acquired - you loose What is the motivation to perform
|
| You get to make a nice payout for a VC. And isn't that all of
| our life goals?
| SirMaster wrote:
| Because you like the work you are doing and the projects you
| are working on?
|
| Presumably you have a lot more control and freedom to do things
| how you want than at a large company with a lot of red tape
| etc.
|
| That's the main reason I would do it.
| lsllc wrote:
| So "heads I win, tails you lose!"
| bwfan123 wrote:
| faang has sucked the oxygen in the air. For experienced
| engineers, the one upside to startups is if you are a founder
| and you are creating a change you want to see in the world. But
| this delusion is shattered as time goes by and you realize that
| you are only a cog in a smaller wheel, whereas, in bigtech you
| are a cog in a bigger one.
|
| On average, startups tend to have a better culture due to the
| incentives at play compared to big-tech. And that attracts
| engineers regardless of the comp.
| crazygringo wrote:
| This is one of the most confusing things I've ever read.
|
| Cognition acquired Windsurf. So how has he "joined Cognition"?
|
| "I had a place at Google DeepMind as part of the deal." What does
| that mean? DeepMind doesn't have anything to do with Cognition
| _or_ Windsurf, right?
|
| Why would an offer at Google require forfeiting vested shares in
| Windsurf? Is that Windsurf policy or Cognition policy or Google
| policy?
|
| "I was ultimately given a payout of only 1% of what my shares
| would have been worth at the time of the deal." So he took the
| payout and forfeited the shares? "In going to Cognition, I've
| chosen a different direction." Or not, he rejected the payout and
| kept the shares? I can't even tell what's hypothetical versus
| what actually happened.
|
| I literally don't understand a single thing about this tweet.
| I've read all the comments here so far and my confusion seems to
| be shared. Can anyone who has context please help explain what's
| actually going on? And particularly how any company could force
| you to forfeit vested shares in a company?
| shawabawa3 wrote:
| You have to know some of the background
|
| Google poached windsurf employees and licensed their tech,
| paying out billions to upper management but apparently offering
| a fraction of the value of shares
|
| This employee chose to stick with windsurf instead of moving to
| Google
|
| Windsurf was then acquired by cognition for an unspecified but
| probably quite low amount
|
| So this employee is now at cognition
| crazygringo wrote:
| Thank you, that helps!
|
| But so did he keep the shares or take the payout? Is the 1%
| payout an accurate reflection of Windsurf's value after
| having lost so many valuable employees? And why didn't he
| take the Google job? Was the 1% contingent on taking the
| Google job? But how could it be, since Google doesn't own
| Windsurf/Cognition? But if it did somehow, did it have a
| higher paycheck to compensate? Or was it contingent on
| staying at Windsurf/Cognition?
|
| This thing needs an in-depth blog post analysis. The tweet by
| itself isn't providing even close to the information
| necessary to understand what's actually going on.
| cyanydeez wrote:
| the board strokes is: Google should have bought the
| company. They didnt. They basically bought the employees.
| They call it a "acquihire". Without these employees, the
| real value of the company fell, allowing cognition to buy
| the company. Had the employee taken employement with
| Google, it's likely their shares in windsurf would have
| been voided, or otherwise not vested. Who knows, these
| private corporations are often doing a bunch of shady
| things to dilute share ownership.
|
| In a private company, there's no "real" public valuation of
| a share, so an employee who has some kind of stake really
| only has two real options to dump their shares, either
| through a company buying it (cognition) or the company
| going public. Without either of these events, it's really
| difficult, even if there's no contract about it, to sell
| the shares.
|
| So the value of the company took a nose dive in the private
| market through the hiring of windsurfs principals, and the
| employee either kept his shares and went with the company,
| or took a job with google. So the two values are:
|
| 1. Stay with Cognition and retain the private market shares
| of Windsurf and salary
|
| 2. Leave cognition, forfeit(?) the shares, get whatever
| salary google offered
|
| So those are the payouts being compared.
| crazygringo wrote:
| Thank you very much! So it seems like the crux of the
| issue still isn't clear, because:
|
| > _Had the employee taken employement with Google, it 's
| likely their shares in windsurf would have been voided,
| or otherwise not vested._
|
| That doesn't make any sense. The shares are _already_
| vested, they legally own them. How could they have been
| voided?
|
| The idea of joining Google resulting in a "1% payout"
| doesn't seem to make any sense? Why would there even be
| any payout at all? And is it mandatory? How could it be?
|
| And then it also doesn't even seem obviously terrible. If
| the valuation of Windsurf tanked, then is keeping the
| shares (now presumably converted to Cognition shares at a
| rate determined by the purchase?) even a better financial
| outcome?
|
| I agree that Google acquiring the talent rather than
| buying the company seems shady. But the "1% payout" still
| isn't making much sense here and needs a lot more
| details. Because it's still not even clear if the payout
| is from Google (huh?) or Cognition (why?), or how it
| could be a mandatory condition of employment at Google.
| stouset wrote:
| Vested is not exercised.
|
| Options vest, but you have to exercise them to purchase
| the underlying shares. This is nominally cheap, but from
| the IRS' perspective you have just spent $1 to purchase a
| share worth $100, so that's $99 of income. Multiply by a
| large number of options and you can easily have a real
| multimillion dollar tax bill even though you have no way
| to sell the shares to recoup their value.
|
| Worse, if the company loses its value before you can
| sell, you're still out those taxes with zero recourse.
| It's an enormous risk.
|
| If you leave a company with vested but unexercised
| shares, you generally forfeit them.
| crazygringo wrote:
| Sure, but I'm not really clear on what that has to do
| with the situation described?
|
| And he calls them vested shares though, not vested
| options, though maybe he's incorrect.
|
| And it's not like you forfeit them instantly after
| leaving anyways. You usually have at least 90 days. And
| the fact that the value of the company is so much lower
| now is favorable, if you think the value will recover.
|
| But again, none of this has anything to do with the "1%
| payout" here that is still totally unexplained.
| masterjack wrote:
| It's possible that in the Google deal you had to agree to
| sell back the shares (at a low value like par or original
| strike price) and the 1% refers to either those proceeds
| or the size of the Google employment package. If you
| didn't agree then you would be left holding your shares
| of a company that is now gutted.
| crazygringo wrote:
| > _It's possible that in the Google deal you had to agree
| to sell back the shares_
|
| But how could Google require that?
|
| > _If you didn't agree then you would be left holding
| your shares of a company that is now gutted._
|
| Which is what is sounds like he wound up doing anyways?
| Which I don't even understand why.
| adgjlsfhk1 wrote:
| Google can just refuse to hire you if you don't
| crazygringo wrote:
| I've literally never heard of a company demanding you
| give up shares in another company as a precondition of
| being hired, for an engineering role.
|
| At the executive level they may not want you holding
| shares in a direct competitor because it presents a
| conflict of interest. But even then you generally have a
| period to divest.
|
| Can nobody explain what the actual demand was here? What
| did Google offer vs. what did they demand, and why? And
| why would _Google_ be buying your shares...? None of this
| makes any sense the way it 's been presented.
| hamburglar wrote:
| How would they even know if you were still holding those
| shares in another company? This scenario is pure fantasy.
| naveen99 wrote:
| Doesn't income happen when you sell the shares ? What is
| the cost basis of the shares you purchase if not the
| strike price of the option ?
| cyanydeez wrote:
| https://taxsharkinc.com/when-are-vested-shares-taxable/
|
| Its different for vesting. Othrrwise even more toxic
| greed and tax avoidance would occur.
| toast0 wrote:
| AMT income happens when the option is exercised (vests
| and paid for), the difference between the value and the
| strike price is income at that time. The AMT cost basis
| is the value at that time ... or you can think of it as
| the strike price plus the amount of income.
|
| At the same time, if it's an ISO option, there is no
| assessment of ordinary tax until the stock is disposed.
| If there's a merger and the proper forms are followed,
| you can be issued stock from the acquirer that retains
| the basis (the strike price) of the original shares. If
| the forms are not followed, the acquisition is a taxable
| disposition.
|
| There's a credit for the difference between AMT tax and
| ordinary tax on ISOs, but it can take many years for that
| to fully work out, and you have to have paid the AMT in
| the meantime.
|
| Early exercise with 83(b) at time of grant (or while the
| value hasn't changed) or exercise-and-sell make the taxes
| make the taxes simplest, but tax simplicity isn't always
| the best strategy.
| ProfessorLayton wrote:
| While you're right that exercising options can be very
| expensive and are a risky tax bet, we're talking about
| _employee #2_ in this case. They should 've been able to
| buy in early at a low price and tax bill if they really
| believed in the company:
|
| - Jan 2021: 3M seed round
|
| - Jan 2024: Series B valuing the company at 500M
|
| That's 3 years of vesting below a 1B company valuation,
| and 75% of a typical vesting schedule. There was plenty
| of opportunity to buy when valuations were low.
|
| There's also 83(b) election that allows one to prepay tax
| liabilities on stock options before they vest.
|
| _Not_ buying stock options or doing a 83(b) election is
| also a bet that can place a cap on losses if the company
| goes downhill, but the risk flips if everything goes
| right.
| toast0 wrote:
| You want to say _exercising_ options. Buying options is
| paying to have an option; you can easily buy options on
| publically traded stocks, for example. Exercising options
| is delivering money that covers the strike price to
| receive the shares... or delivering the shares to receive
| the strike price, if it was a sell /put option (which
| employment related options wouldn't be)
| stouset wrote:
| I encourage you to put yourself in that person's shoes.
| It is _never_ a simple decision.
|
| Yes, there is plenty of opportunity to exercise when
| valuations were low. But that _also_ means you 're buying
| before there's clear evidence that the company will be
| successful. It also still means you're out the cash to
| exercise the options before there's a market for those
| options and before you know that the company will
| actually go public and not crater for whatever reason.
| You also have no idea how much your shares will be
| diluted.
|
| Yes, exercising on day 1 optimizes your outcome in the
| case of a successful exit. But it is absolutely comically
| a poor choice for the 95% of cases where your equity ends
| up being worth next to nothing.
| ProfessorLayton wrote:
| I'm speaking from experience. Yes, it means buying in
| before there's clear evidence of success, that's the
| risk! The lower the risk the lower the reward.
|
| Waiting until the company is worth billions of dollars
| before buying its stock is one of several options
| available, and each has its own risk/reward profile.
| stouset wrote:
| My point is that exercising the company's stock early is
| fraught with risk and is in almost all cases a -EV play.
|
| Yes, the option technically exists. But without perfect
| foresight it's not a _good_ option. It's not even an okay
| one. It's an exceedingly bad one in most cases.
|
| Acting like this employee was silly for not dumping a
| huge sum of money into company shares before it was in a
| position to succeed is flatly ridiculous.
|
| Stock options are--as they currently stand--a lottery
| ticket that startups dangle in front of people's faces
| that allow candidates to believe they will get fairly
| compensated for their labor, but with so much wiggle room
| that the company rarely has to ever make good on it. And
| I _also_ say this from personal experience as employee. I
| was an employee ~#600 of a unicorn that went public. I
| ended up in something of the sweet spot of equity: most
| of the people who joined before me _left_ before me and
| got less than I did in the end. Most people who joined
| after me got less equity at a worse strike price than I
| did.
|
| I did pretty good. And this was a rare raging success
| story. Most people did worse than me.
| ProfessorLayton wrote:
| > Acting like this employee was silly for not dumping a
| huge sum of money into company shares before it was in a
| position to succeed is flatly ridiculous.
|
| Once again we're talking about employee #2, exercising
| early would not have been that expensive! They had access
| to a strike price and low tax liability that the vast
| majority of later employees would ever see. You are
| correct in that most shares in startups are worthless,
| but that's orthogonal to exercise price and tax
| consequences.
|
| The calculus changes if/when the company becomes a
| unicorn, but by then the risk profile is much more
| favorable than when it was a scrappy startup, and returns
| are lower.
|
| > I also say this from personal experience as employee. I
| was an employee ~#600 of a unicorn that went public. I
| ended up in something of the sweet spot of equity: most
| of the people who joined before me left before me and got
| less than I did in the end. Most people who joined after
| me got less equity at a worse strike price than I did.
|
| Well one has to stay long enough to vest in order to keep
| the equity, being early isn't enough.
|
| I don't know your specifics so maybe you did make it out
| better than earlier employees, but some tricks companies
| use once they hit unicorn status (and have hundreds of
| employees) is stock splits. They want to pad their share
| grants for newer employees to make it seem more
| attractive and make the strike price lower. Of course
| earlier employees that exercised and left get their
| shares multiplied too.
| stouset wrote:
| > Once again we're talking about employee #2, exercising
| early would not have been that expensive!
|
| Exercising early _almost certainly_ would have cost
| hundreds of thousands of dollars. For employee #2 of a
| startup, you're almost certainly already working for
| mostly equity and not salary.
|
| You are high as a kite if you think it's reasonable to
| dump large sums of money into a five-person company while
| getting paid peanuts in return.
| ProfessorLayton wrote:
| Without details we'll just have to agree to disagree, but
| exercising options is not an all-or-nothing affair and
| can be done with a budget in mind.
| stouset wrote:
| A -EV investment like early-stage startup equity is still
| -EV for every incremental dollar spent. Paying upfront
| for equity whose terms can be rewritten out from under
| you with zero input is not smart from any angle.
|
| You're basically criticizing the guy for not having
| perfect foresight, when the real issue is that startup
| equity is trivially manipulable by upper-level
| management. It's a carrot they can dangle in front of
| people while only rarely having to pay even a fraction of
| what was promised in the rare event of a profitable exit.
| cloverich wrote:
| IME the real issue is people don't know what or how to do
| it. If you're a pre-seed employee, you're going to be
| able to exercise 100% of your shares for a minuscule
| amount of money. But you need to know what to do and do
| it right away.
|
| In other cases, you may be later but have a higher strike
| price (expensive-ish to exercise), but its at least close
| to the valued price and in that case you can exercise
| without a major tax hit. But again usually people learn
| this after the valuation goes up and there's no way to go
| in reverse. So best we can do is share information here I
| guess, and perhaps advocate for some kind of regulation.
| bigmadshoe wrote:
| Vested options haven't been exercised and are typically
| voided when leaving a company. Just because you vested
| the options doesn't mean they are permanently yours,
| unless you choose to exercise them before leaving.
| dboreham wrote:
| > They call it a "acquihire"
|
| Surely it needs to be called something else, because
| acquihire means "hire some employees by means of
| acquiring the company they currently work for" (it's in
| the name). Since Google did not acquire the company, it
| can't be an acquihire event. "bribehire" or something?
| dboreham wrote:
| Replying to myself because I discovered someone coined
| the term "Bizhire"[1]
|
| [1] https://medium.com/@villispeaks/the-blitzhire-
| acquisition-e3...
| cutemonster wrote:
| Interesting article! "Blitzhire" he calls it
| mikestew wrote:
| _Google should have bought the company. They didnt. They
| basically bought the employees. They call it a
| "acquihire"._
|
| That's just called "hiring". In order to "acquire-hire"
| employees of the target company, one must first "acquire"
| the company and the "hiring" part just comes along with
| the deal. In this case, Google skipped the "acquire"
| part.
| gsibble wrote:
| The VCs all got paid their multiples.
|
| Google put a ton of money into the company which then
| repurchased select people's stock while leaving everyone
| else high and dry.
| deanmoriarty wrote:
| Do you know what are the mechanics that allowed the VCs
| to get repayed, but not the employees who did not take
| the Google offer? Is this an issue with liquidation
| preference, or was there something more shady going on
| that truly allowed VCs to make a "big" exit, while the
| employees owning common shares did not?
| bryanrasmussen wrote:
| Writing for LinkedIn metrics means never having to make an
| understandable statement that someone could take exception to.
| mjiang41 wrote:
| Some more context from Ali Partovi, founder of Neo accelerator:
|
| https://x.com/apartovi/status/1948444826674102732
|
| bad look all around.
| SirMaster wrote:
| Why do people care so much about what some random guy did in a
| company acquisition?
| lokar wrote:
| A lot of this industry is focused on early stage startups as a
| path to financial success. The rules and laws around this don't
| tend to protect even early employees much at all. People depend
| on social norms for what to expect. Shifts in the norms are of
| interest.
| blitzar wrote:
| Everyone thinks they are the next random person who wins the
| startup lottery. Dreams of 50 million dollar paydays are
| brought crashing down when they realise they will be lucky to
| get 50,000.
| Muromec wrote:
| Because it sets the expectations and everyone here is
| (pretending) to play the same game as that random guy. Okay,
| not everyone, but it's YC forum.
| lemax wrote:
| This is a fair cautionary tale but it's worth understanding the
| specifics of the situation - Windsurf maintained a relatively
| easy to replicate product with no moat, and employed a bunch of
| attractive talent. The company got gutted of these employees and
| lost its valuation because no suitable buyer thought their IP was
| exceptionally valuable on its own. Just because this was the
| outcome for Windsurf does not mean there are no longer
| opportunities to join startups building sticky customer bases
| with valuable IP and walk away wealthier when they exit - yes
| there is a liquidity problem[1] but let'a be honest with
| ourselves about the specifics of the case for Windsurf.
|
| [1] https://techcrunch.com/2024/01/11/us-startups-have-a-
| liquidi...
| gsibble wrote:
| Actually, their recent acquirer is now raising at a $10B
| valuation from Founder's Fund.
|
| They had plenty of value left even after getting gutted.
| Voloskaya wrote:
| I don't understand why the specifics of the situation matters
| here. We know the company got acquihired for $2.4B, the problem
| is, why did all of it go to investors and founders and nothing
| for employees?
|
| I'm not sure customer churn rate has any impact on liquidation
| preference.
| KaiserPro wrote:
| I was aquihired by a FAANG.
|
| The headline "startup bought for x million" is almost always a
| lie, either direct or by omission.
|
| First, when a startup is bought, its generally not bought at the
| headline rate. So if you see a "bought for $45m" that doesn't
| mean People who own shares all got a % of 45m.
|
| That number is normally bullshit, but also a "total package"
| which include share offers for joining the new company.
|
| This means you will get say 1% of the headline buyout now, and
| then golden handcuffs to get the rest.
|
| Also, it makes no sense to give employees that much money
| upfront. After all, if I'd been given $1m in one go, I wouldn't
| be fucking working now.
| bagels wrote:
| 1m isn't enough to really retire in in silicon valley
| throwawayq3423 wrote:
| Or in any big city tbh.
| Scoundreller wrote:
| Cleveland not big enough for you???
| throwawayq3423 wrote:
| Cities like Cleveland have reasonable pricing built into
| their appeal. Without it, there isn't much left.
| loire280 wrote:
| Sure, but if you're 10+ years into your career and have been
| financially conservative (i.e. have a positive net worth), a
| lump sum of $1m could be enough to retire to a lower-cost
| location.
| andrewmcwatters wrote:
| Hell, roughly $600,000-800,000 is enough to lean FIRE, the
| last time I checked.
| usaar333 wrote:
| Sure, if you are single with no family and wiling to live
| outside California.
| quickthrowman wrote:
| If I retired at 40 I don't think I'd want to remove more
| than 2% a year from the principal amount, which is..
| $12,000-$16,000 a year.
|
| How is that possible? Even with a fully paid off house,
| you still have property taxes, utilities, maintenance.
|
| Even 4% a year which is recommended for a 30 year
| retirement, you're only taking out $24,000-$36,000 a
| year.
| hervature wrote:
| You are supposed to invest and keep the money working for
| you. Adjusted for inflation, S&P 500 returns 6.5% a year.
| That alone gets you above the poverty line. Recall, this
| is inflation adjusted so your $600,000 is growing with
| inflation and the poverty line income also grows over
| time. This does not account for any swings.
| loeg wrote:
| You can't actually draw down 6.5%/yr, though, because of
| sequence of returns risk. The number that is actually
| safe (historically) is something like 3.5%.
| quickthrowman wrote:
| Keep in mind that almost all of the FIRE advice available
| online has been written in a bull stock market that is
| almost 2 decades long (COVID drawdown is a blip on the
| 2008-2025 chart).
|
| Past performance is not indicative of future returns. Do
| you know anyone still running a risk parity 60% UPRO/40%
| TMF (3x long S&P 500, 3x long 20-year Treasury Bonds)
| portfolio? That portfolio composition had massive
| returns, until the Fed started hiking rates.
|
| The annual implied volatility of SPX is around 15-20%, if
| you want to withdraw 6.5% a year at 40 and have to
| restart your career at 55, be my guest.
|
| A 40% drawdown on 600k is -240k which puts you at 360k,
| 6.5% of which is $23,400. Starts getting pretty tight if
| you need to sell assets for cash which reduces your
| future returns.
| deanmoriarty wrote:
| > Keep in mind that almost all of the FIRE advice
| available online has been written in a secular bull
| market that is almost 2 decades long
|
| Most of the reasonable FIRE advice (e.g.
| https://earlyretirementnow.com/ quality) suggests a
| ~3-3.5% withdrawal rate, which has been measured using
| historical data way before the current secular market.
|
| Is your take that even such withdrawal rate wouldn't work
| anymore, moving forward?
| daemonologist wrote:
| 3.5% historically holds up over longer retirements (I ran
| a rough model and got ~98% success for 50 years). $21k is
| quite lean - you'd have to pick and choose luxuries like
| a car, no roommates, travel, etc. - but for a single
| person in many parts of the country it's doable. The big
| gamble is that Medicaid might get cut further, which
| would definitely force you back to work.
| quickthrowman wrote:
| Yes, it's doable if you rent a $500/month
| apartment/bedroom in a rural area or split a shitty
| $1000/month apartment in a mid tier city and don't have a
| car, never travel, and don't use medical care. My
| employer paid health insurance premiums are ~$15,000/yr.
|
| That sounds like my personal idea of Hell, I'd like to be
| able to get treatment if I got cancer instead of being
| given a prescription for painkillers and a look of sorrow
| from a doctor that can't treat me.
|
| FWIW, I currently live in a shitty $1000/month apartment
| in a mid-tier city, not casting any aspersions on the
| living situation. But, I've lived in this same city
| without a car and it's miserable.
| ghaff wrote:
| Presumably, it would be cheaper if I had a fairly modern
| urban condo but my exurban property is a good $15K+ per
| year. Heck, I just had a kitchen fire and, even with good
| insurance, I'll probably be $50K out of pocket when all
| is said and done. I could probably have done things more
| on the cheap but didn't really make sense.
| dmoy wrote:
| Lean fire on $600k-$800k is taking an extreme gamble on
| the cost of health insurance continuing to be subsidized
| way beyond Medicaid levels. Which you might be fine with,
| but it's a pretty big risk.
|
| Unsubsidized healthcare in a lot of places in the US
| costs $10k-$20k per person per year. For early retirement
| that eats up like $400k-$500k per person.
| dom96 wrote:
| This is why you don't retire in a country with private
| healthcare
| ghaff wrote:
| Medicare isn't that much cheaper than exchanges although
| the cost decreases over time as you aren't earning
| significantly any longer. And lots of issues associated
| with moving countries.
| HNdev1995 wrote:
| My parents live in the UK which has free healthcare. The
| situation is dire. The waitlist for chronic pain
| surgeries are 3-4 years long. Lots of people, including
| my parents, have resorted to flying out to other cheaper
| countries to get treatment.
| igor47 wrote:
| Is chronic pain an outlier here, or representative of
| wider trends? My uninformed prior is that surgery is not
| a good approach for chronic pain, and that the NHS is
| more likely to cover surgeries with a more clear-cut
| cost/benefit ratio
| ljf wrote:
| For things like hip replacements, cancer treatment and
| other physical ailments the NHS is pretty awesome. Some
| stuff it fails at I am sure, but as you say that is in
| part down to the way that it prioritises care based on
| results.
| jamil7 wrote:
| Because politicians have made it their mission to chip
| away at the NHS over decades. This doesn't say anything
| about the efficacy of statutory healthcare.
| ashdksnndck wrote:
| But it's quite relevant to the question of whether you
| can just assume that some country will foot the bill for
| your health care needs at old age, and therefore you
| don't need to worry about health expenses if you retire
| early. Rising costs of health care systems are a serious
| problem in most developed countries. "Eh, I'll just move
| to Europe in old age" is not really a comprehensive plan
| to ensure you get good healthcare far in the future.
| eastbound wrote:
| It does. In every public-healthcare country, this
| happens. Because incentives are stacked against
| delivering to the patient and for increasing spendings.
| It's the tragedy of the commons.
| jamil7 wrote:
| > In every public-healthcare country, this happens.
|
| Outside of Canada and the UK this isn't true.
|
| > Because incentives are stacked against delivering to
| the patient and for increasing spendings.
|
| Germany, The Netherlands and Japan all have regulated
| competition models.
|
| > It's the tragedy of the commons.
|
| Public healthcare isn't a free for all, its regulated,
| actively managed and budgeted.
| ricardobeat wrote:
| I wouldn't use the Netherlands as a great example either.
| The family doctor model is slowly disappearing, replaced
| by private clinics. It is relatively difficult to get
| appropriate treatment for anything, and there are long
| waiting queues even for intake appointments. It has only
| been getting worse in the past decade.
| eastbound wrote:
| > > It's the tragedy of the commons.
|
| > Public healthcare isn't a free for all, its regulated,
| actively managed and budgeted.
|
| Not what I mean. It's racist. Public jobs are being
| reassigned in a racist way to help whoever the currently-
| elected leader wants to favoritize, and, as the NHS ad
| says: "This is us, now", clearly demonstrating a no-
| whites ideal (NHS's intentions, not mine).
|
| Public health funnels money from people who paid to get
| coverage, to, on one part, those would be rejected in a
| normal system (non-insured people) because it's easier to
| say yes when it's diluted; to to, for the second part,
| people self-selected by the group of currently-employed
| people, ie in the UK it means that normal people are
| selected with all criteria but protected classes (the
| legal term, "protected classes", I mean) have priority
| for those jobs.
|
| You may pretend the NHS is not racist, but the NHS
| actions speak for themselves.
| dom96 wrote:
| Private healthcare is still much cheaper in the UK, so
| you're still better off retiring there. Might not always
| be the case of course, but I would bet the situation will
| continue to be better than in the US.
| mathiaspoint wrote:
| If you're willing to be fiscally conservative, go to a
| cheaper location, and continue working on side projects you
| don't need the payout at all.
|
| The question everyone seems to be asking is "is the payout
| worth spending the first ten years of your career in the
| West Coast startup scene." Ten years is quite a lot of time
| to spend somewhere you don't actually want to live.
| KaiserPro wrote:
| probably right, but I'm not in SV. So its enough to pay off
| the mortgage and provide enough monthly income to not care
| what job I'm doing
| ohdeargodno wrote:
| Take a million, go live literally anywhere that isn't Silicon
| Valley, remote work for a company that interests you, or your
| own project.
|
| There's very few currencies in the world in which 1M isn't
| enough to retire. USD isn't one of them.
| occz wrote:
| >There's very few currencies in the world in which 1M isn't
| enough to retire. USD isn't one of them.
|
| Unless you're planning on retiring as cheaply as humanly
| possible, 1M is not enough to retire for the large majority
| of the currencies in the world.
| ryandrake wrote:
| $1M is enough to "Ramen Retire" in most of the US. If
| you're willing to eat noodles and make some lifestyle
| sacrifices, it's kinda sorta doable.
| ponector wrote:
| For majority of the world population 1M is amount they
| will never earn through their entire life. And they live
| just fine. I'm sure anyone can have a really nice
| retirement with one 1M, just not in the US.
| baq wrote:
| Don't retire in Silicon Valley then
| kentonv wrote:
| Yeah, I used to hear all the time that "a startup is worth $1
| million per engineer in a pure acquihire", but learned the hard
| way this is a myth.
|
| When we were talking to various companies about acquiring
| Sandstorm.io (my startup) in 2017, one of the companies told
| me, essentially: "We aren't interested in your IP, only the
| employees. We'll give you a set of job offers for them. We will
| then sum up the salary and equity grants from these offers, and
| call that the acquisition price. If you want to take some of
| that money and redirect it to your investors instead, that is
| up to you."
|
| I was a bit taken aback. Obviously I wasn't about to take a cut
| of my employees' future comp and give it to investors.
|
| Instead we ended up going to Cloudflare, but not as an
| acquisition. Cloudflare told us very honestly that they
| couldn't justify buying the IP, but they would be willing to
| acquire the company for $0 to wind it down for us. I decided to
| just take the job offers but keep the company independent as an
| open source side project, thinking maybe I'd revive it
| eventually. Turned out to be a mistake as some guy who was mad
| we didn't hire him sued Sandstorm six months later, and that
| was then my problem instead of Cloudflare's, oops. Should have
| sold for $0.
|
| (Once it became clear to the plaintiff('s lawyer) that we
| weren't going to settle, they stopped pushing the case forward,
| but didn't drop it, so it just sat in limbo for 5 years before
| the judge finally threw it out it 2022. Meanwhile I couldn't
| dissolve the company and had to keep filing taxes for it.
| Ugh... lessons learned.)
| kingforaday wrote:
| Whoa, bummer but interesting. It can be hard to let go.
| Thanks for sharing.
| swyx wrote:
| sorry that happened to you. what taxes do you have to pay on
| a company making 0? just delaware franchise tax?
| kentonv wrote:
| That and $800 CA franchise tax. But the money wasn't really
| significant. It was just annoying to have to prepare the
| returns every year.
| MichaelZuo wrote:
| Did your legal counsel at the time not mention that was a
| possibility?
| kentonv wrote:
| Yes, of course. But given the circumstances we all
| believed it was highly unlikely he'd actually sue.
| lvl155 wrote:
| So many bitter aholes in this business.
| igor47 wrote:
| That sucks. FWIW I had a sandstorm instance back in the day,
| and I think it was an idea ahead of it's time. The stuff you
| were trying to do I think got easier as containers became
| more widely adopted, and as enshittification has made the
| case for self-hosting more obvious. So... Thanks for trying!
| sokoloff wrote:
| $1M in one shot leaves you with around $600K after taxes in
| most states. That's enough to pay you around $24-30k/yr.
|
| Unless you already had several other million saved already, I
| bet you'd be working again.
| para_parolu wrote:
| $25k/yr can be decent living in some places.
| azinman2 wrote:
| In no place where you're getting a 1M pretax offer.
| shutupnerd0000 wrote:
| Yeah but what if - hear me out - you move after you get
| the money?
| albedoa wrote:
| Yeah man, I'm sure that's exactly what they meant when
| talking about a decent living for $25k/year.
| chollida1 wrote:
| Sure but not in North America, where i assume most readers
| of this site are from.
| golergka wrote:
| Just out of pedantry, all of Mexico is in North America.
| jahewson wrote:
| Not in any decent places.
| shutupnerd0000 wrote:
| I read this in a British accent.
| wnc3141 wrote:
| Sure, buts its a solid career break for a year.
| _DeadFred_ wrote:
| When I was a kid (early 80s) the receptionist at my mom's
| company drove a Porsche and didn't need to work anymore because
| of a past company hitting it big. This woman wasn't a financial
| genius and didn't hardball negotiate with the previous company
| for her receptionist job, it was just Silicon Valley didn't
| used to be so gross and actually paid out to people.
| caseysoftware wrote:
| Some of the mechanics on this one..
|
| Generally, when a startup is acquired, people get paid in a
| number of tranches:
|
| - First, debts get cleared in order according to debt types.
| This could be cloud providers, lawyers, employees who deferred
| salary, etc, etc. If there's still cash left..
|
| - Then preferred (generally earliest) investors get paid back.
| Some investors will have liquidation preferences where they get
| 2-5X their initial investment. If there's still cash left..
|
| - Then execs get their preferred shares cashed out. Depending
| on how many rounds they'd raised, they may own less than you
| think. If there's still cash left..
|
| - Finally, general stockholders get paid. This is where most
| employees may actually get cash.
|
| To further complicate things, some people could be in multiple
| places here. A founding exec may have lent the company money to
| get started, have preferred shares, and have common shares so
| they could get paid out in early levels but not at the end.
|
| *There are WAY MORE nuances in this but the point is: You don't
| just say "total price divided by shares times number of shares
| = the cash you get"
| jschveibinz wrote:
| I am surprised that the employment agreements between
| execs/founders and Windsurf didn't address this. A cautious
| investor--or even a cautious key employee joining the team--would
| have locked the founders and key employees down to prevent them
| from being hired away without some recourse. This is especially
| important when all of the value was in the employees. There
| should be lawsuits forthcoming...
| toomuchtodo wrote:
| Non competes are illegal in California, there is no legal way
| investors can lock founders and employees down. This is venture
| capital investment risk. The employees, who are most of the
| value (aside from potential IP and customer contracts), can
| walk at any time.
| DanHulton wrote:
| It doesn't have to be a lawsuit preventing them from leaving.
| Golden handcuffs usually work pretty well for such a
| situation.
| toomuchtodo wrote:
| Unless investors and management are unwilling or unable to
| counter a superior offer. "Pay them more" works when
| willing and able. Otherwise, bounce. Comp is king during a
| gold rush you're unsure how long will last.
| jschveibinz wrote:
| I understand your clarification. You should be able to use
| vesting schedules, right of first refusal to counter, careful
| definition of IP and trade secrets with assignment to the
| company, right of repurchase of shares, etc.
|
| This is indeed venture capital risk, but this case lays bare
| the exorbitant amount of risk for investing in these types of
| companies--perhaps especially in California?
| mawadev wrote:
| I'm waking up personally to the unethical side of Software
| development as well. You can either do little and get paid pocket
| change or you can provide a ton of value for pocket change next
| to some promises lulling you in, where the value of your work
| exponentially increases, but you will see nothing of it and
| whatever you do: you are still a replaceable cell in excel to
| them and there will be ways where you get dragged over the table.
| If the money isn't directly in your bank account, it might as
| well not exist or was a lie. Sooner or later you are the horse
| behind the barn anyway.
| istjohn wrote:
| To state the obvious, software developers are doing just fine.
| GuinansEyebrows wrote:
| how much change fits in your pockets?
| Muromec wrote:
| You do sometimes get the 0.31% of a relatively big number under
| a promise you tag along for two years and some more pocket
| change on top. Still better than just pocket change zo
| pembrook wrote:
| Okay, but how much do you think you deserve as an employee who
| has invested none of your money in the company and decided to
| join on a 6-figure salary only after the company is already
| through YC, is funded by top investors and looks attractive?
|
| If you're instantly replaceable by any dime-a-dozen engineer
| than can install packages on npm and use react components and
| add a thumbs up to slack messages...to not get accidentally
| rich because you just took a high paid tech job a year
| ago...seems fair?
|
| I just fail to see why everyone in the comments here believes
| they deserve to be compensated at the level of the top 0.01% of
| all people without starting their own business.
|
| Start your own company if you think it's so easy to be a
| founder instead of an employee. Nobody is stopping you.
|
| I also think it's some crazy cognitive dissonance to assume
| you'd be able to walk right into a FAANG sr. eng gig instead.
| As if most startup employees haven't tried before joining
| [insert startup].
| mawadev wrote:
| Thank you for your comment, it proves my point!
| xvector wrote:
| > I just fail to see why everyone in the comments here
| believes they deserve to be compensated at the level of the
| top 0.01% of all people without starting their own business.
|
| No one is saying this.
|
| There is no question that the Windsurf and Scale AI ploys
| effectively left employees with ownership in the company high
| and dry.
|
| > but how much do you think you deserve as an employee
|
| You deserve what you are promised. If a founder says you will
| get rich if the company goes to the moon, and they instead do
| some strange maneuver so only they cash out, the founder is a
| scumbag.
|
| You are acting like early startup employees risk nothing
| working for a startup, and invest nothing of their own.
| Again, that is a weird assumption.
| saagarjha wrote:
| Do you think founders deserve 100x more money because six
| weeks ago they sat in a few meetings with Y Combinator that
| went well?
| pembrook wrote:
| If it's so easy to do that instead (and if you think that's
| how startups work), why the hell would you join as an early
| employee instead of starting your own company?
|
| Hint: it's not as easy as you think.
| baq wrote:
| Being a founder is a job as much as being an engineer is and
| being an investor is - especially if you get investors early
| and don't take debt to capitalize the company (which you
| shouldn't if you like your life.) If you did take debt as a
| founder, don't brag about your bad decisions as if they make
| you special.
| bravesoul2 wrote:
| Take the moralising out it.
|
| If I join a lottery syndicate and it wins 100m but I only put
| in 1% of the syndicate amount say $100 do I not deserve $1m
| because I'm just a "whatever I am just"???
| pembrook wrote:
| You didn't put anything in though, the lottery syndicate
| _paid you_ to work as a janitor.
|
| And the point is the syndicate didnt win??
| bravesoul2 wrote:
| You pay by getting 120k/y for 60hr week instead of 300k/y
| for 45hr week in Bay area.
|
| Pretty expensive.
| bjackman wrote:
| As an engineer if you are gonna be a rank and file employee you
| need to do it for your own reasons. I think the main good
| reasons to do it are:
|
| 1. It's relatively chill and you value the stability. You
| deliver competence from 9-5 then go home to your family or some
| other thing that's more important to you than work.
|
| 2. You really enjoy the pure engineering side and find meaning
| in the technical artifact you're creating. Probably it's open
| source and has some value/community outside of your employer.
|
| 3. You're gaining valuable experience that you can later
| leverage into something else. Probably you're in the first 5
| years of your career.
|
| If the main thing driving you is growing a business, and you
| don't directly own (not options or RSUs or whatever, actual
| real equity) a significant slice of it, you are very likely
| misdirecting your energy.
|
| (I guess there are also cases where the mission of your
| organisation is not profit and you care about that. I don't
| know any engineers in this position but I might be quite happy
| working in the public sector).
| ponector wrote:
| Welcome to the real world. It is the case with pretty much
| every job, not only IT.
| stan_kirdey wrote:
| Engineers: always negotiate for higher base salaries. In the vast
| majority of cases--especially during acquihires--your equity will
| be worth little or nothing. Founders and VCs still get paid;
| employees rarely do.
|
| Don't just accept promises. Ask for the 409A valuation,
| liquidation preferences, and pay bands. If a company won't
| provide transparency, that's your signal.
|
| Equity is a lottery ticket. Salary is money in the bank.
| gsibble wrote:
| I tell every engineer always to maximize their cash comp and
| every founder and investor always says "No, that's such a bad
| idea! Get more equity!"
|
| Yeah, because that is in your interests, not the engineer's.
| 01HNNWZ0MV43FF wrote:
| I remember when my old employer was doing another round of
| funding
|
| They offered to sell me more shares
|
| I countered that I'd been trying to dump the shares they
| already gave me and if the shares are truly worth X dollars
| they should buy them back from me
|
| Anyway glad I quit
| debatem1 wrote:
| > if the shares are truly worth X dollars they should buy
| them back from me
|
| I always offer companies pushing equity hard to trade for
| cash at 10% of the highest number they try to get me to
| value it at. Nobody has ever taken me up on it, even when
| they really should have.
| usaar333 wrote:
| Not everything is adversarial. More cash pressure on the
| company itself can be bad for the company which is bad for
| you too.
|
| I always take more equity. I wouldn't work for you in the
| first place if I didn't believe in your equity.
| baq wrote:
| This may work for you, but in general isn't good advice.
| You shouldn't be confusing beliefs and risks. Risk should
| be managed - you should be comparing cash invested into the
| public market (or treasuries, or bitcoin, whichever you
| prefer) with equity in the startup, not with a savings
| account.
| usaar333 wrote:
| Startup equity is worth a
| lot:https://www.amafinance.org/startup_comp/
| tensor wrote:
| There are more than enough stories about employees
| complaining that they didn't get a big enough payout on an
| acquisition or IPO to know that this isn't true. It all comes
| down to your risk reward preference.
|
| Sure, if you don't want to take a risk then look for a higher
| salary, and probably at a more established company because
| even if you have mostly salary and little equity a startup is
| still risky (and you're making it even more so by putting
| cash pressure on the company at that stage).
|
| On the other hand, if you want a chance at a bigger payout,
| you'll want more equity. And yes, you may well not get that
| payout.
| tedivm wrote:
| > There are more than enough stories about employees
| complaining that they didn't get a big enough payout on an
| acquisition or IPO to know that this isn't true.
|
| That's exactly why it _is_ true. If every person who held
| early stage stock walked out of those events happy then no
| one would recommend they focus on salary.
| cortesoft wrote:
| The problem is that your risk is compounded because your
| equity risk is correlated with your salary risk - if one
| fails the other is likely to fail, too.
|
| Even if each risk is a good one to make separately, it
| isn't always good to make both risks.
| CalChris wrote:
| There is another variable. Find better companies to work for.
| If you don't think this is a unicorn, don't work for them. If
| this is another stablecoin startup leveraging quantum AI then
| you deserve what you get, cash comp or no.
| cortesoft wrote:
| It doesn't matter if you think it is a unicorn or not, it
| is about risk management.
|
| Early stage investors know that even the best startups have
| a fairly low chance of success, which is why they diversify
| by investing in a lot of them. The many failures are paid
| for by the few successes.
|
| As an employee, you are only given stock in the one company
| you work for. Even if you think it will be a success, it
| isn't smart to put all your eggs into that one basket. No
| investor would do that, and no employee should either.
|
| If you are working at a startup, a lot of your eggs are
| already in that basket; your ongoing salary is dependent on
| the company continuing to succeed. If you take less cash
| for more equity, you are putting even more eggs into that
| same basket. If it fails, you are going to lose all the
| equity AND your salary.
|
| You don't want your investment risk and your salary risk to
| be that correlated.
| gsibble wrote:
| I've tried to ask dozens of companies that wanted to hire me
| just for how many shares were outstanding and/or authorized.
| They almost always refused to share.
|
| You can almost never get any info on equity until it's too late
| and you realize it's worth nothing.
| georgemcbay wrote:
| > I've tried to ask dozens of companies that wanted to hire
| me just for how many shares were outstanding and/or
| authorized.
|
| Those questions are certainly worth asking but employees
| should also keep in mind that even if they _do_ share that
| information your equity can still later be diluted away to
| worthlessness.
| mgfist wrote:
| There's other gotchas too. Ratchets, liquidation
| preferences, restructurings (recapitalizations) etc etc
|
| There's many opportunities for VCs and founders to screw
| you over. And that's assuming things go well enough for
| that to be an option lol
| dilyevsky wrote:
| My 2c is these are almost always a consequence of the
| company not being a good business. Well, sometimes you
| get asshole founders/board members too that's not as
| common as the company just being an absolute money pit.
| So instead, I'd focus on asking about business
| fundamentals/strategy - if the company is money printer,
| everyone is likely going to do well financially
| mikert89 wrote:
| nope, it happens in "good businesses". once real money is
| on the line, everything is a dog fight. no one talks
| publicly because of the reputational repurcussions
| dilyevsky wrote:
| not ime. you're also much more likely to get sued for
| this when real money is involved. cases that i know
| personally (and myself) either did ok and got pay out or
| everyone went to zero (below or close to strike price)
| but founders got secondaries (which screws VCs not the
| employees).
| mikert89 wrote:
| seen many many cases first hand in NYC. Also, as an
| individual its very hard to sue a company with a huge
| amount of VC funding. you need a 100k to burn on it to
| even have a basic chance, and most cases are a legal gray
| area, most lawyers wont even take the case.
|
| even finding a lawyer with the expertise to handle a case
| like this is not easy, its a very small world among those
| types of lawyers
| jashmatthews wrote:
| Make friends with lawyers.
| drmath wrote:
| > I've tried to ask dozens of companies that wanted to hire
| me just for how many shares were outstanding and/or
| authorized.
|
| "Wanted to hire me" as in they made an offer, or an earlier
| step? At offer stage, I've never had a company refuse to
| answer these questions. I don't have "dozens of companies"
| worth of experience though, maybe one dozen if that.
| busterarm wrote:
| Every time I hear this I think experiences and expectations
| are vastly different between SV and the rest of the
| country. 30ish years of working in New York and I haven't
| encountered a single company that isn't 100% opaque about
| their equity to employees until time of exit/IPO. And I
| keep a large network.
|
| That said, everyone here treats equity of non-public
| companies as if it's toilet paper. Some of my coworkers got
| very lucky and very rich when our company went public, but
| that was also a long time ago now.
| umanwizard wrote:
| I worked at one for five years: Materialize. Based in
| NYC. Everyone knew how many shares they owned, what
| percentage of the total equity that represented, and what
| the rights of the preferred share classes were.
| busterarm wrote:
| Glad to see this data point. This is a company founded
| relatively recently and I hope this means that some kind
| of change is happening regionally.
| toomuchtodo wrote:
| Additional resource:
|
| _Ask HN: How to negotiate stock options?_ -
| https://news.ycombinator.com/item?id=28401655 - September 2021
| djoldman wrote:
| Indeed. Likewise with non-guaranteed bonuses (gotta love the
| "plus a discretionary bonus!" commentary during offer
| discussions).
|
| It's always worth offering to take equity as long as they agree
| in writing to not ever dilute your shares and vest them
| immediately. However, it's unlikely that any company will
| agree.
|
| It's best to imagine compensation as exactly one's salary. Then
| (virtually) all surprises are good.
| azinman2 wrote:
| I don't see how a company could promise this. Everyone gets
| diluted for every funding round, for example.
| djoldman wrote:
| They can easily, they just don't.
| Xylakant wrote:
| Legally speaking, it's probably possible. Practically
| speaking it almost certainly a guarantee that the company
| will never see outside investment. On every round someone
| would need to pony up the cash to fill that employees
| stock. Anti-dilution clauses exist, but they never work
| like that.
|
| Such a privilege is also likely to be almost worthless -
| if the company succeeds and the round makes it worth
| more, you'll win even with dilution. If the company
| doesn't, then other clauses such as liquidation
| preferences will make your stock worthless, regardless of
| how much you own.
| djoldman wrote:
| The difference is that if the company succeeds, an
| employee afforded this provision is guaranteed to make
| $X.
|
| Without this provision, it's possible in many ways for
| the employee to be left with far less than $X, even if
| the company succeeds. In some ways <<<<<<$X.
| gwd wrote:
| There is actually a sense to the dilution. If I have
| something I think is worth $10m, and I'm asking someone
| else to give me another $10m, doesn't it make sense for
| that person to own 50% of the company? Why would any
| investor give you $10m wile receiving no ownership of the
| company? How are you going to give these newer investors
| ownership, if you don't reduce the ownership of everyone
| else?
|
| The claim in the tweet was that they got 1% _of the value
| of the diluted shares_ : e.g., on paper they should own
| 1% of $100m, but somehow they only got $10k out of it.
| There does seem to be a culture of this going around now
| -- the VC version of "Hollywood accounting". In a lot of
| situations it doesn't make much sense to me -- is it
| really worth poisoning the well of startup talent for the
| VCs to get $95m instead of $85m?
| djoldman wrote:
| I don't think I understand.
|
| If the value of a company is $10m and the company asks an
| investor to give $10m in exchange for equity, the
| investor should own 100%.
|
| If the value of a company is $20m and the company asks an
| investor to give $10m in exchange for equity, the
| investor should own 50%.
| gwd wrote:
| > If the value of a company is $10m and the company asks
| an investor to give $10m in exchange for equity, the
| investor should own 100%.
|
| That's not _investing_ , that's _buying_. _Buying_ means
| the buyer gives $10m to the previous owners, at which
| point as you say, the previous owner owns 0% and the new
| owner owns 100%. But the _company_ is in the same
| position as it was before -- the same amount of cash on
| hand as it did before.
|
| For _investing_ , you're putting cash into the _company
| 's_ account, which raises the total value of the company.
|
| Value of the company before investment: intangibles +
| pre-investment cash - debt = $10m
|
| Suppose I own 10% pre-investment; 10% of $10m is $1m of
| estimated value.
|
| Value of company after the investment: intangibles + pre-
| investment cash - debt + $10m == $20m
|
| Now I own 5% of $20m, which is still $1m of estimated
| value. The investor owns 50% of $20m, which is still $10m
| of estimated value.
|
| In practice of course, there are different classes of
| shares which end up being paid out differently.
| munksbeer wrote:
| I don't know how this works, but my question is, on a
| funding round, couldn't the C suite just allocate
| themselves additional equity in proportion so that their
| total value remains the same?
| Xylakant wrote:
| They could, but the shares represent value - and that
| money needs to come from somewhere. Simple, but extreme
| example: A company is valued at 10 million gobbledoks,
| and the C-Suite holds 10%, representing 1 Million
| valuation. Now the company takes 10 Million gobbledoks
| Investment that end up in cash on the companies bank
| account. This raises the the valuation to 20 Million.
|
| Under simple dilution rules, the Investor takes 50%, and
| the existing shareholders are diluted to 50% of their
| stake - the C-Suite owns 5% of 2 Million, 10 million as
| before.
|
| If the C-Suite demands that their equity proportion
| remains at 1%, they'd suddenly own a stake representing 2
| million valuation. That difference needs to come from
| somewhere.
| tyre wrote:
| > It's always worth offering to take equity as long as they
| agree in writing to not ever dilute your shares and vest them
| immediately. However, it's unlikely that any company will
| agree.
|
| Well, yes, because that's insane.
| djoldman wrote:
| I think it makes perfect sense. It's a guaranteed incentive
| for a potential employee to increase the value of the
| company and act in its best interest.
|
| Absent those guarantees, it's smoke, nothing, kaput: 1.5%
| equity or whatever % can become approximately 0% and
| there's nothing the employee can do about it.
|
| They could structure the agreement in other ways to
| incentivize the potential employee: if additional shares
| are issued, pay a dividend to the employee.
| chii wrote:
| > pay a dividend to the employee.
|
| the whole point of equity compensation is that it
| replaces cash, as the startup rarely has sufficient
| liquidity in cash.
|
| But equity is often used in ways the employee does not
| understand and get screwed over. It's also why there are
| accredited investor requirements for VC/startup
| investments - so that only those who can afford to pay
| for a lawyer and such can partake in these deals.
| Unfortunately for an employee, the loophole is that they
| don't get this regulatory scrutiny, and also don't have
| or earn enough to hire a lawyer (and oft times not even
| access to the cap tables - it's just a literal number of
| shares, without context).
|
| No wonder employees get screwed while investors (of the
| accredited kind) don't.
| djoldman wrote:
| > the whole point of equity compensation is that it
| replaces cash, as the startup rarely has sufficient
| liquidity in cash.
|
| Understood and it makes sense. Offering equity to a
| potential employee is a way for the employee to benefit
| potentially on future growth in the company.
|
| I'm proposing that if there is a future funding round,
| pay the employee a dividend from part of the proceeds. Or
| maybe give them more shares or a combination; but put it
| in writing from the start.
| baq wrote:
| And yet they agree to pay salary immediately.
| yibg wrote:
| No one pays 4 years of salary immediately.
| usaar333 wrote:
| Under any normal circumstance I've ever seen, you should be
| taking the higher equity/lower salary combination and should
| focus on equity rather than salary.
|
| The only time it ever makes sense to push for more salary
| instead is if you literally cannot get a job at a public
| company (or even a near IPO unicorn). Plenty of startup
| employees can, so clearly they believe their startup equity is
| worth something.
|
| Financially speaking, startup equity is actually worth a lot as
| an employee (https://www.amafinance.org/startup_comp/). Yah,
| over 50% it's going nowhere but expectation needs to consider
| how huge the win is even if it is lower probability.
| almostgotcaught wrote:
| > Yah, over 50% it's going nowhere but expectation needs to
| consider how huge the win is even if it is lower probability.
|
| yes that's literally the definition of expectation
| value...... so ev = 1 bagillion *
| 0.0000000000000001 = ~0
|
| hence you should absolutely not be taking higher equity/lower
| salary ever. hell i wouldn't even take that at a publically
| traded company if given the option.
| doctorpangloss wrote:
| The interesting thing going on is, stars align. The kind of
| person who has to think about this problem should take
| equity. The kind of person who would choose to take cash
| isn't going to be hired at the kind of VC backed business
| that will end up being worth something.
| Dayshine wrote:
| Yes, a company will do very well if it fills itself with
| naive employees who think that if they work insane hours
| and sacrifice their life for equity (which they'll never
| get an exit event for) will do very well.
|
| But you don't want to be that employee...
| almostgotcaught wrote:
| Man what level of weird delusion is this? Windsurf was an
| app for code completion not interstellar space travel
| lol.
| cortesoft wrote:
| Man this is a ridiculously naive take.
| gjm11 wrote:
| If I'm understanding your logic correctly, I think it's
| flawed.
|
| It seems like you're saying: if you choose to work for a
| startup rather than a bigger company, it must be because you
| think their equity is valuable, so you should prefer to take
| more of your pay in the form of equity if you can.
|
| But there are plenty of other reasons for choosing to work at
| a startup.
|
| You might have chosen to work _at that particular startup_
| because the work interests you. You might prefer startups to
| bigger companies because they have less bureaucracy and can
| do (some) things faster. You might prefer startups to bigger
| companies because there are fewer layers of management above
| you and so you have a better view of why you 're doing what
| you're doing.
|
| Even if you're only in it for the money, I don't think your
| argument is valid, though this is more of a nitpick: it might
| happen that a startup particularly wants _you_ or at least
| _your skillset_ and is willing to pay more for it than any
| bigger company you 've found. You might think the startup is
| likely to fail, but still prefer being paid twice as much.
| (This is kinda nitpicky because I don't think this situation
| is super-common, unlike the other ones I mentioned above.)
| zdragnar wrote:
| I've long preferred working for startups over big companies,
| but my equity has rarely been worth more than a day or two's
| salary equivalent.
|
| I know a few people who did well working for unicorns, but
| that isn't most startups, and pretending that any given
| startup will be one is selling yourself short.
| cortesoft wrote:
| First, your stock has a much higher than 50% chance of being
| worth less, even at the best startups. This is why early
| stage investors invest in so many companies... a vast
| majority are worth zero, but the few that make it big pay for
| all those and more.
|
| This is why you would never see an early stage investor
| invest in only one company. They need volume to be able to
| survive the high risk/high reward nature of startup
| investing.
|
| Now, maybe you think you are a better judge of the
| probability of success for your startup than an investor, so
| the risk is lower. You would be wrong; if there was a way to
| reliably predict which startup would hit it big, then
| investors (who spend all their time trying to predict exactly
| that, and have a lot more data and history to use in their
| evaluation than you do as an employee) would have a much
| higher success rate.
|
| So even if you have a very promising startup, your equity is
| a huge risk. Your company probably won't hit it big, and if
| it does you have to hope you aren't screwed out of your
| equity by the millions of tricks they use to screw employee
| shareholders; dilution, preferred shares, etc.
|
| Even worse, you are taking double risk. Your startup is
| risking both your equity AND your salary. You want to
| diversify your risk, so you can use your investment when your
| salary fails and use your salary when your investment fails.
| In this case, those both will fail together if your company
| doesn't make it.
|
| Look, equity and stock options are great, but you REALLY have
| to discount its value as an employee because of the way the
| risk shakes out as an employee.
| usaar333 wrote:
| I didn't claim my risk is lower, but as my link notes I can
| quit and recall my investment while the investors cannot.
| makk wrote:
| Yes, maximize cash and use it to acquire a diversified
| portfolio.
| andy99 wrote:
| Yes - equity should be an incentive to contribute the the
| company's success, and partial compensation for the risk of
| going to a startup. One should value it at precisely $0 in
| terms of life planning.
|
| This becomes truer and truer the more of an employee and the
| less agency over the company's choices you have, but generally
| if you're not a co-founder (founding engineer doesn't count)
| equity traded off against salary is someone scamming you.
| neilv wrote:
| > _equity should be an incentive_ [...] and partial
| compensation for [...] One should value it at precisely $0 in
| terms of life planning.*
|
| Not very good incentive or compensation, if you have to value
| it at $0.
| baq wrote:
| Still better than a lottery ticket.
| daniel_iversen wrote:
| Not if you live in a country where you can end up paying
| more taxes than the equity is worth! Be a little careful
| with Options and RSUs depending on where you live, and
| even more so for certain companies etc
| KingMob wrote:
| Given opportunity costs, you could easily argue that it
| should have negative value.
| parpfish wrote:
| > equity should be an incentive to contribute the the
| company's success
|
| the much bigger motivation is "keep the company afloat so i
| can keep drawing my salary", so just boring old non-equity
| paychecks provide plenty of motivation.
|
| if you're an employee that thinks your contributions are so
| great that you are single-handedly juicing the stock price or
| valuation, you're _probably_ wrong but if not... you should
| probably take those skills and found your own startup.
| fusslo wrote:
| my equity from 2years pre-acquisition: ~$2800. Then the CEO
| gave out bonuses when everyone threatened to quit. Then after
| his 3 month vacation to Italy, he came back driving his new
| Ferrari.
|
| My equity from 4 years ( employee ~60, grew to over 500 ):
| worthless. No one is able to exercise any options. They also
| readjusted when the valuation came below the total raised,
| making the value of my vested shares ~$13k ( down from
| ~$200,000 ) . They 'made us whole' by giving more shares with a
| new 4 year vesting schedule.
|
| Startups have found ways to fuck everyone but the investors
| with equity. It's confederate dollars; funny money. Maybe some
| people get great deals, I don't know. From my limited
| experience at very successful startups, the only people who
| made real money were those able to parley huge bonuses or base
| salaries.
| dehrmann wrote:
| At some point, aren't the C Suite and directors failing their
| fiduciary responsibility? I know they have broad freedoms,
| but when you're reducing an a minority shareholder's equity
| by 95%, it's well past "fiduciary responsibility" and looking
| like fraud.
| fusslo wrote:
| I am convinced every executive and wanna-be executive is on
| the 'inside joke' of funneling money out of the company
| into their pockets.
|
| I am also convinced that investors believe it's the C
| Suite's responsibility to tear away any equity from
| employees to leave the largest pot for investors.
| mlinhares wrote:
| Anyone that doesn't think this is delusional.
| mikert89 wrote:
| ive been in these rooms and heard the conversations,
| employees are seen as disposable liabilities
| toss1 wrote:
| YUP
|
| Terms and phrases I've heard verbatim from investors
| and/or founders:
|
| "There's a thousand ways to screw minority
| shareholdeers."
|
| "Cram-down" (repeatedly, like it is an ordinary thing to
| do, effectively repudiating or diluting away entire
| classes of debt and/or equity)
|
| "I hate to lie, but you often have to." (said as if there
| is no choice in the matter)
|
| "You have to screw the other guy before he screws you."
|
| "If there's a problem in a joint venture and you put out
| the resources to fix it, you're the chump."
|
| It is a good idea to not do business with people who say
| these kinds of things.
|
| It is delusional to think you will be the special one who
| they actually treat fairly and not be targeted by their
| greed and lack of ethics.
|
| If you are really lucky, you will escape and find an
| attny willing to take your case and win a lawsuit and
| still get to chase them for the judgement.
|
| The only winning move is to not play.
|
| (Not to say there are no honest ones, but it is _really_
| getting scarce, and many honest ones have left the biz.)
| droopyEyelids wrote:
| This is what it means to _own_
| RamblingCTO wrote:
| Can confirm from my experience. Although not everyone is
| like this. Sent me into burnout that I didn't wanna be a
| dick and extract as much "value" from the employees by
| walking over them and fucking them over when the chance
| arises. It's always empty promises to string people
| along. From my experience, these people (the resource
| extraction dicks) are also some of the must unlikable and
| unhappy people I've ever met.
| ojbyrne wrote:
| Of course. So if you're the employee, you're going to sue?
| If so you're paying for your lawyer, and the company is
| paying for theirs. Guess who goes broke first.
| lmeyerov wrote:
| Sorry to hear that =/
|
| Work for good people with a history of moral dealing. A
| family member just had a life-changing payout because
| leadership was generous. A friend walked away from a company
| pre-pivot without equity for what became one of the decade's
| biggest acquisitions.
|
| This stuff is lottery tickets, but real ones. You need to be
| smart about who you make your limited bets on.
|
| And agreed, big cautionary note here shows that Windsurf
| having "founder-friendly" investors does NOT mean employee-
| friendly ones.
| fermentation wrote:
| I often see job postings here looking for "top <1% engineer
| talent" paying $100k and <1% equity and I wonder who is
| actually applying.
| blittle wrote:
| Not a 1% engineer
| ageyfman wrote:
| they have to say this to safe face. people who're
| interviewing most of the time can't even tell if it's a 50%
| engineer
| ponector wrote:
| No one will say: we are looking for cheap mediocre talent
| with no intention to grow, just to process assigned Jira
| tickets. Even if that is the actual truth in many cases.
| jongjong wrote:
| I worked for an ed-tech startup as employee number 4, joined
| when it was obscure; not even in the Alexa top 4 million
| rankings and almost no revenue. The founder was really good
| though and gave everyone shares instead of options. I got a
| bit under 0.2% equity in the company. The company grew
| (slowly and steadily) to $6.5 million USD revenue with about
| 10% net profit margins but its last valuation (over 10 years
| later) was like $8 million USD. They charge like $15 USD PER
| YEAR PER student for their product so very cheap; I feel like
| they could easily increase the prices given how widely used
| they are in my country (over 30% of students in my country
| use the app).
|
| I had the option to sell some equity recently but it would
| have only been like $16K USD so I held... I had about $9K
| taken out of my salary to pay for those so it doesn't make
| sense to sell given the massive growth the app and not that
| much dilution... The financial gain barely covers the
| inflation.
|
| It feels like both revenue and profits have been kept
| artificially low. $6.5 million per year revenue, still
| growing steadily, with a loyal customer base with 10% profit
| seems really good... A valuation of $8 million seems
| ridiculously low... Not even 2x revenue, for a tech platform
| with good lock-in factor (they sell a lot of licenses to
| schools)!
|
| It's kind of amazing how bad a deal it is to work for someone
| else as an employee. Even if the founder is good and generous
| in many ways and the business side (which you have little
| control over as a developer) happens to work out pretty well,
| they can still pull all sorts of levers to make the deal bad.
| With this one, I'm going to wait it out 20 years if I must. A
| lot of the game is just timing, you gotta wait it out, sell
| at the top... Some people see a peak opportunity to cash-in
| multiple times in their lives, some people never see it! In
| my case, I haven't seen the top yet.
|
| I never had any opportunity to make serious money ever. Never
| had an opportunity to pull the trigger and make even $100K.
| The best I ever got was in crypto, my crypto was worth $100K
| but I was earning like 100% annual yield and required a
| 1-month unlock period. So I made more than that by holding it
| for 3 years anyway...
|
| I think my career story so far is quite interesting. Probably
| more interesting than 99% of the classic SV startup stories
| (at least what they say publicly). I've done some things
| nobody else has done. Made money in truly adverse
| environments where a lot of people hated my guts. I've seen
| people behave in strange ways. At times, I felt like I was
| almost breaking through the membrane of 'the matrix'; almost
| transcending my social class. But all I got for it was 3
| years of passive income. I never had the opportunity to cash
| out big.
|
| It's tough out there, so tough, it often feels
| fake/artificial. Often, it feels like you have to be 'chosen'
| and that's all that matters. Your work doesn't matter, how
| talented you are doesn't matter, how lucky you get doesn't
| matter (besides the luck of 'being chosen').
|
| At the end of the day, money is like a river and people
| upstream from you get to decide whether or not the river will
| flow in your direction. When you understand that new money is
| created constantly and, just like the river, the water cycles
| between the mountain and the sea, you start to understand the
| value of positioning and 'being selected'. The people
| upstream will keep telling you that they don't control the
| flow of money; that the river flows naturally through the
| lowest valleys... It's your job to put yourself in that low
| valley... But really, they've built massive dams up there
| directing the water almost arbitrarily. You may be at the
| lowest valley but they're redirecting the water elsewhere
| artificially because it suits them better. Reality is that
| they can easily alter the path of the river anywhere they
| want and it has little to do with 'building something people
| want'. It's about building something the people upstream
| want... And sometimes they just want to help their existing
| friends; unfortunate for you if you are not their friend.
|
| It's a catch-22; you need rich friends to get money but you
| need money to get rich friends. But I suspect it's way easier
| for a poor person to get rich by befriending a rich person
| than it is for a poor person to get rich without rich
| friends. The second approach feels like you're piercing
| through 'the matrix' because of all the weird almost
| conspiratorial resistance you might get (tech feels like one
| big club).
|
| Sometimes you might accumulate some dirt on some rich people
| and that gives you some leverage over them but it's the kind
| of leverage where you have to keep coming back to them to get
| crumbs. I feel like you can never break through that way due
| to regulatory capture. You can only do limited damage to them
| and it's always costly to you. They still have the balance of
| power.
| CaveTech wrote:
| Sorry to break it to you but 10% profit on 6.5M rev is very
| low and will absolutely not fetch a high multiple,
| especially considering this is a mature 10 year old
| business. This is not a high growth business and you may
| have grown overly rose colored glasses by thinking it could
| be priced as one.
| grepfru_it wrote:
| So much more. What assets/patents do they own? How much
| money is in the bank? What does their liability sheet
| look like? How "hot" is their industry right now?
|
| Some time ago I found a good formula to plugin numbers
| and get a valuation multiple. The questions above were
| the ones that really moved the multiplier. A major lot of
| "startups" are in the 1-2x range. The hot ones will peak
| at 7-12x.
| jongjong wrote:
| I suppose the industry is not hot right now. EdTech was
| never really very hot. It was 'luke warm' at best, a
| decade ago. They own a lot of software, also, they
| publish their own math textbook (both digital and print).
| They have licenses with thousands of schools across
| multiple countries. I don't recall they have any debt.
|
| I feel like they could easily bump up profits by $2
| million just by letting go of people... But they could
| probably double the license cost per student. Although
| schools don't have much money, they are kind of slow and
| bureaucratic; set in their ways. It's a small cost for
| them anyway, once a system is part of the curriculum,
| they'll probably pay extra to avoid reorganizing the
| lessons.
| CaveTech wrote:
| As you describe this is largely a cash flow business and
| the bulk of the value should be extracted via dividends
| to the benefit of major shareholders.
|
| A tech enabled business needs gross margins north of 70%
| to be attractive from a leverage standpoint, unless
| revenue is scaling very rapidly. Without these there's no
| attractive exit opportunities.
| wanderlust123 wrote:
| Why are the margins so low?
| jongjong wrote:
| They have a lot of employees. I think over 50. Probably
| more than they need and they re-invest a lot in the
| business. Also, the cost of $15 per user per year is VERY
| LOW.
| cornholio wrote:
| 50 employees generating 6.5 mil in yearly sales means the
| business would barely cover payroll and basic expenses in
| a first world country. In a lower income country, they
| can be profitable by taking advantage of cheap labor, but
| that usually does not scale well to international markets
| in services.
|
| 0.2 % of that is nothing.
| yard2010 wrote:
| This is one of the best things I have read today. It
| resonates deeply with my realizations and experience
| working in early stage startups.
| roncesvalles wrote:
| I know this is HN but imo it's rarely ever a good deal to
| work at startups as an employee instead of a cofounder (with
| actual cofounder equity not just the title i.e. within the
| same order of magnitude as the largest-shareholding
| cofounder), over a bigger established company.
|
| The only good reasons to do so are if you want to learn or
| make contacts so that you can found your own startup later.
|
| In my pensive moments, one of the things about humans that
| makes me go "god damn" is how little money it takes for
| insanely talented people to just come and work for you.
| DSingularity wrote:
| I don't think that's entirely correct.
|
| You need to work with good people. There is no substitute
| for ethics.
|
| Also you need not go for roles where they offer .3 % and
| make a big deal about it. Don't take less than 1% minimum
| and as soon as two years pass by and you have carried your
| weight start looking for a new job. If they value you they
| will bump you up. It they don't you will bump yourself up
| by going for a new job. And don't be afraid to go for
| competitors if you believe in the value of the space.
| freeone3000 wrote:
| The startup I work for keeps my employment because they
| keep bidding competitively with the investment banks I
| would otherwise work for.
|
| They have the cash, if you have the leverage. Use it.
| marssaxman wrote:
| The other good reason is that you might enjoy the
| experience more than you would enjoy the stultifying,
| oppressive, slow-moving environment of a big corporation.
| That's why I keep doing it: I'm not expecting to get rich,
| I'm just trying to live a good life, and it's proven to be
| much easier for me to do that when I work for a startup.
|
| I value startup equity at ~$0, but if the salary is enough
| to live comfortably, that's fine.
| supportengineer wrote:
| The fun part comes when you put in 20 years doing this, and
| your dream is to buy a nice house, and you finally get your
| seven-figure payout, and.... it's not enough to buy a house.
| Because now a house is 3 million dollars.
| kstrauser wrote:
| What kind of house had you been dreaming of? I live in SF,
| and even here $3M goes an awfully freaking long way.
| anukin wrote:
| Maybe OP wants a house in atherton next to andreessen.
| gcanyon wrote:
| I'm guessing it's a very select group of people who want
| a house next to Andreessen...
| seattle_spring wrote:
| If I had to, I would pay just to live _away_ from that
| select group.
| supportengineer wrote:
| This is the cheapest house in Atherton at this moment
|
| $4.888
|
| https://www.zillow.com/homedetails/86-Rittenhouse-Ave-
| Athert...
| BobaFloutist wrote:
| $3m is a pretty decent down payment for that.
| supportengineer wrote:
| My point was that you could grind for 20 years and get $1
| million payout. Or even a multi million dollar payout.
| And your reward is that you have to keep on grinding for
| the rest of your life.
| 0x00000000 wrote:
| anything within 45 minutes of your office in palo alto
| (where you are mandated to show up 5 days a week). this
| will get you a 1300sqft piece of shit built in 1964 with
| asbestos and lead paint and lead pipes and a cracked
| foundation (also some dipshit realtor had them paint all
| the original wood beams and paneling inside gloss white
| and replace the original wood and slate floors with grey
| vinyl) from some baby boomer forklift driver or mailman
| who paid 40k for it (you will pay 40k per year in
| property taxes for it), all for the privilege of "only"
| spending an hour of your life a day commuting so you can
| sit in your assigned area of your open concept office
| with noise canceling headphones on zoom meetings for 4
| hours a day surrounded by other people on zoom meetings
| who also just expended a collective 5000 man hours and
| countless CO2 emissions to be there.
| dcow wrote:
| I think you just illegally accessed my brain...
| sgerenser wrote:
| And here I thought I had it bad when houses went from
| 400k to 800k for the same house pre- vs post-pandemic in
| Raleigh, NC.
| antonymoose wrote:
| I remember being a young junior engineer, my manager had
| just bought a nice house in the good part of town
| (Charleston, SC) for about 350k. We had a good "be smart
| with your money and this could be you too in 5 years"
| conversation. I think by the time I was ready to buy that
| house had jumped to 600k valuation, these days it's close
| to $1M in valuation.
|
| Only way to get a nice house for 300k now is to work
| remote in some podunk town for a big city salary.
| supportengineer wrote:
| All of this
| kstrauser wrote:
| Or you could spend half that in the heart of SF and have
| a nice place in a decent neighborhood:
| https://www.zillow.com/homedetails/1265-Union-St-San-
| Francis...
|
| It's not that it's cheap here, not by any measure, but
| it's not nearly so dire as y'all want to claim.
| nimos wrote:
| That is a tenancy in common 2 bedroom apartment not a
| house. Shared ownership of a 100+ year old building with
| "leased" parking 2 blocks away. Not exactly the home
| ownership dream.
| stouset wrote:
| I own one unit in a 2-unit condo built in the 1910s in
| SF. It's pretty fucking dreamy if you ask me.
| socalgal2 wrote:
| different strokes for different folks. I can't fucking
| stand hearing every breath of every neighbor in a 100yr
| old SF house and having to tiptoe at all times so as not
| to upset the other tenents
| stouset wrote:
| I am almost never aware of my upstairs neighbors, through
| two pairs of them, including a dog and a baby.
| kstrauser wrote:
| Then click around to find something more your liking.
| There are a lot of places for sale for under $3M that
| aren't exactly a tent under a bridge.
| bluedevilzn wrote:
| That too for $1.5 million. 99% of Americans would picture
| a mansion when they think of a $1.5 million home.
| zeroonetwothree wrote:
| Hey now, around 15% of the population live in CA or NY so
| I think your estimate is too high
| bravesoul2 wrote:
| Luckily you can live in a city and then later sell that
| appartment and buy another house in the sticks that is
| the dream.
| johann8384 wrote:
| With $3MM you could just stop working and live in many
| other nice enough places without ever having to work
| again.
| Retric wrote:
| 3% of 3 million is 90k which sounds better than it
| actually is as you need to pay for health insurance.
|
| Plenty of people live in any city with less than that,
| but it is below the average income in many nice counties
| in the US.
| justinclift wrote:
| > you need to pay for health insurance.
|
| Only if you still live in an idiotic, backward country
| without public health care.
| Retric wrote:
| You pay for health insurance in every single county,
| either directly or through higher taxes.
| justinclift wrote:
| Yep. And it's about 2% of my tax, which isn't noticable.
|
| Unlike getting anything more serious than a cold in an
| idiotic, backward country without public health care.
| Retric wrote:
| US is an outlier by spending 17% of GDP on healthcare
| requiring high insurance costs by 9-12% is common in most
| developed countries requiring not 2% of your taxes by
| ~10% of your income. https://en.wikipedia.org/wiki/Health
| _spending_as_percent_of_...
|
| Even in China you're looking at 6% of income. Of course
| taxes aren't evenly distributed, but 90k means enough
| income to be worth taxing without the political power to
| offload the tax burden on others.
| justinclift wrote:
| Looking at that table you shared, it seems the US spends
| about 50% higher (17.2% vs 12.3% and less) than any other
| country on that list.
|
| And it _still_ has extreme problems for anyone with an
| illness more serious than (say) a cold.
| Retric wrote:
| You're misunderstanding what the issues with US
| healthcare are.
|
| I've had significant medical issues in the US and
| received truly excellent care without significant out of
| pocket costs, the same is true for many of my friends and
| family. There's a reason there's significant medical
| tourism to the US and from the US. However on population
| wide measures like life expectancy you're better off
| providing basic care for 100% of the population than
| world class care for 40%.
|
| There's also major underlying issues like decades of
| obesity and ignorance around 'alternative medicine',
| vaccines, etc.
| vkou wrote:
| In the United States in particular, though, you pay twice
| - once for the healthcare, a second time for all the
| bloat and waste that comes with it.
| Retric wrote:
| 1/3 of US medical spending could be avoided by moving to
| an efficient single payer system.
|
| But, a lost of 'waste' is diminishing returns where
| there's some benefit to the procedures preformed. It's
| easy to say paying 1 million for an extra week is a poor
| investment, until it's you making that decision for a
| loved one.
| pjerem wrote:
| Except that through taxes, your coverage is not dependent
| on your contribution and your contribution depends on
| your revenue.
|
| Typically you contribute nothing if you have no revenue
| and you are still as much covered as the next rich guy.
|
| That's a huge difference. It means that you can see a
| doctor or have an ambulance transport you to the hospital
| for an expensive emergency surgery for 0EUR whoever you
| are. And for the expensive drugs you need after that ?
| That's still 0EUR with no paperwork.
|
| But to be fair, I'm exaggerating. You may have a 1EUR
| franchise when you see the doctor.
| K0balt wrote:
| This. I moved in a developing nation with a GDP smaller
| than most US states. I have access to excellent modern
| healthcare and facilities, get more than 5 minutes in
| front of my doctor, often 1/2 hour+, and my (nearly 60
| years old) health insurance is less than 75 usd a month.
| Covers 90 percent plus, including mental health, limited
| dental, and optical. The healthcare sector is private /
| public hybrid, profitable, and growing. Hands down better
| in every way than the US state I left.
| akshitgaur2005 wrote:
| May I ask which nation?
| pjerem wrote:
| That's the description of most European countries.
| nkmnz wrote:
| lol no. Private health insurance in Germany is ~800-1000
| for a 60 y.o. - public insurance might be cheaper, but
| you need to qualify for that when you move here by
| working as an employee when you're that old. Working
| permission will require you to work full time. So you'll
| end up working full time and pay ~600-1200 (based on your
| salary) in contributions.
| pjerem wrote:
| I never said public healthcare is free for strangers.
| It's rarely the case.
|
| Most of the time if you are not a citizen you need to
| either work or pay taxes. In fact even if you are a
| citizen, you may not be covered if you live abroad.
|
| It's relatively easy to be covered as a stranger : in 99%
| of situations, if you just set up here seriously and not
| as a tourist, you'll be covered. I count a 60yo who never
| contributed to the system or worked here as a tourist.
| K0balt wrote:
| Yeah, I run a coffee /cacao farm that employs a few
| locals, but obviously I don't qualify for the government
| insurance. My insurance is private/ un subsidized.
| zeroonetwothree wrote:
| I think you mean "immigrant" rather than "stranger"
| K0balt wrote:
| Dominican Republic. The medical tourism industry here is
| booming as well. The public sector facilities are not as
| nice, but you can get free care for the vast majority of
| basic things that a person needs, without worrying about
| a bill. Still, people that can usually use private
| clinics because the experience / comfort/convenience is
| much better.
|
| What they do subsidize here is education. Anyone with the
| drive and family support to do so can become a doctor,
| but you have to do a rotation in the public medical
| facilities to maintain your licence, and all public
| hospitals are teaching hospitals, so your case will be
| observed by 10 to 15 students and a bunch of residents if
| it's interesting.
|
| The system seems to work well.
|
| I should also clarify that 75 dollars is about a weeks
| wages here at minimum wage, so roughly equivalent to $400
| in the us economy. That figure tracks for most cost of
| living expenses here, except luxury items which are
| typically more expensive here than in the USA.
| AngryData wrote:
| 90K is still 50% above the median income, not to mention
| the fact that you have twice as much as time available
| and using just a small amount of that can be used to cut
| costs significantly in other areas. It is more
| effectively a $150K income if we add in the median wage
| from the job you aren't doing.
| Retric wrote:
| Nationwide, the US median income for full-time workers is
| over 62k without considering benefits, but many areas are
| well above that.
| conductr wrote:
| Except you're a wage slave and your American Nightmare
| comes with a mortgage, your sizable interest payments are
| likely funding the retirement income of a boomer too
| (along with bankers too, they always get a cut)
| coffeebeqn wrote:
| Buying a $3M house does not mean they have $3M cash
| labster wrote:
| You should have bought in when Prop 13 went into effect,
| you'd only be paying $3k in property taxes today instead
| of $40k.
| gammarator wrote:
| Or inherit the Prop 13 rate from your parents.
| mjcohen wrote:
| I voted against prop 13, but now I like it living in a
| house in Westchester for 44 years.
| zeroonetwothree wrote:
| There's some restrictions on this now though. It's not as
| great as it was before.
| frankus wrote:
| Every now and then I dream about how much more money I'd
| be making if I lived in the Bay Area, but then I read
| something like this and realize that earning ~half as
| much working remotely from a cheaper (at least when I
| bought) city maybe isn't so bad.
| kstrauser wrote:
| They are greatly exaggerating. One tangible advantage to
| living somewhere expensive with higher salaries is that
| anything you can buy online is effectively that much
| cheaper. An iPhone costs the same in Arkansas as in San
| Jose, so you'd end up working many more hours to buy one
| in AR than in CA, on average.
|
| Yes, housing is more expensive. A lot more. Everything
| else is way cheaper.
| hollerith wrote:
| Services are also more expensive because the person
| performing the service must pay the high rents, too.
| kstrauser wrote:
| Not proportionally more, in my experience, and surely not
| for people moving here for the kinds of jobs we're
| talking about.
| anonym29 wrote:
| The trick is to rent cheap and live like a college
| student in SF/bay area while young, save aggressively,
| invest intelligently, then move somewhere comfortable but
| more affordable (CO's front range is lovely) for your
| 30s/40s.
| BobaFloutist wrote:
| Just watch you don't get overly acclimated to the
| weather, or you'll end up with a single-digit number of
| cities in the world you find comfortable
| gametorch wrote:
| I'm so so so glad I didn't spend my twenties working and
| saving.
|
| I've lived a thousand lives, spent most of the time as
| true quality time with people I love, and I still have a
| few years left in this decade of my life.
|
| And I'm still further ahead, financially speaking, than
| >99% of other people my age. (To those asking, I tripled
| down on life after getting a remote job.)
|
| The one year I spent 9-5 in an office as a traditional
| SWE was by far the quickest and least eventful year of my
| life. Also probably the saddest.
|
| I'm very glad I just said "no" and walked away and simply
| lived. It was absolutely worth the risk. I would never
| trade these years for the ability to buy a house in the
| Bay Area suburbs.
|
| I probably will be able to do that anyways, if I want to,
| even though I don't.
| AngryData wrote:
| Thank you, so many people like to go about cost-of-living
| and pretending things are equal because of that, but the
| vast majority of goods people buy are not priced that
| way, and in truly remote places the cost of goods
| actually go up. The land or housing might be cheap, but
| pretty much everything else costs the same, so the lower
| paying job still hurts.
| zeroonetwothree wrote:
| I would say the vast majority of _spending_ is affected
| by COL, since it's all incorporating price of labor.
| Maybe not the majority of _goods_ but that's often a
| smaller part of spending.
|
| I will say though that travel is the main one that's
| obviously independent of where you live (at least
| mostly). So that's kind of nice.
| _DeadFred_ wrote:
| I forgot to factor in the time/quality of life cost of
| dealing with snow, winter heating, shoveling drive/roof,
| driving and driving risk.
| thatfrenchguy wrote:
| Are you the kind of person who refuses to go to the east
| bay or live next to middle class Asian Americans or
| Latinos? Because there are plenty of nice places for 3m
| 45 minutes from Palo Alto. Arguably you could get a house
| on the south side of the city and be 45 minutes from
| downtown PA by car or Caltrain.
| kortilla wrote:
| Pitching a 45 minute commute as as something as
| acceptable for $3 million is insane. It has nothing to do
| with class. That's a shit life driving that every day.
| all2 wrote:
| I do a minimum of 2 hours a day. I think people in this
| particular conversation might be just a little divorced
| from reality.
| grego wrote:
| I've spent all my working life in jobs with the rule that
| the commute should not be more than 30 minutes by bike.
| I'm now 62, and that's one life choice I've never
| regretted.
| kortilla wrote:
| So? My point is that's a miserable life to put up with
| when you can afford a $3 million dollar home.
|
| 8% of your waking life going to and from work without
| getting paid for it is dumb
| 0x00000000 wrote:
| i live in RWC
| latentsea wrote:
| And those who live in Silicon Valley are the supposed
| winners.
|
| It just doesn't stack up. This world is cooked. The steak
| used to be medium rare once upon a time, but now it's
| pure charcoal.
| ashdksnndck wrote:
| Redwood City is 20 mins from Palo Alto and has a lot of
| houses for $1-1.5M. $3M means you are paying extra for
| something optional. It's not the minimum requirement.
|
| Lots of people are paying millions extra just to live up
| winding roads on a hill, where the commute is longer, and
| you need a geotechnical engineer to design your patio.
| 0x00000000 wrote:
| it's more like 30-50 min with traffic
| ashdksnndck wrote:
| 30 mins - possible with traffic, especially to a far
| corner of Palo Alto.
|
| 50 mins - what on earth? Take the train. Even a bicycle
| would be faster.
| dfadsadsf wrote:
| Redwood City has terrible schools (relatively) and many
| people consider excellent schools for their kids as hard
| requirement.
| ashdksnndck wrote:
| School quality in the Bay Area is a red queen's race, and
| a pressure cooker environment is not good for the kids.
| Apparently the solution is grade-separating Caltrain.
| zeroonetwothree wrote:
| The median income in the Bay Area is around 120-180k. You
| aren't buying a 3m house for that, so how is it all those
| people somehow survive?
| _zoltan_ wrote:
| for a standalone house in my area (lakeside near Zurich,
| Switzerland) you'd pay way more than 3M... apartments go
| for 2+.
| seattle_spring wrote:
| Couldn't you just not live "lakeside"?
| _zoltan_ wrote:
| of course that's an option. then you can get a house for
| a measly 2 million! public transport will only take an
| hour or more from there .. :)
|
| my wife doesn't drive and we wanted to have access to
| good public schools and good transportation. this is not
| a given if you go more rural. The postbus goes maybe
| every hour or so.
|
| the lakeside communities near Zurich are great and all of
| our friends live in one of them (on the same side of the
| lake of course). not living here would have severe
| effects on my wife's and our kids' social lives.
| MadDemon wrote:
| Intrest rates for morgages in Switzerland are around 1%
| and for tax reasons most people only pay off a third of
| their property. The payments are very managable, as long
| as you have the downpayment. You can't fully compare this
| with a similar price in the US where interest rates are
| much higher and people pay off the full morgage.
| lotsofpulp wrote:
| $3M is this 2,240 sq ft home on a 5k sq ft lot in San
| Mateo, and as far as house amenities/quality, this is
| pretty unimpressive.
|
| https://www.zillow.com/homedetails/221-Woodbridge-Cir-
| San-Ma...
| jahewson wrote:
| One block from the freeway, no less.
| pinewurst wrote:
| Convenient for the commute.
| chasebank wrote:
| I'm in Santa Barbara, CA. Good friend of mine just bought
| a shithole 3-2 1300sqft for $2.2m. $3M doesn't go very
| far considering 30 years ago it was retirement status
| almost anywhere.
| all2 wrote:
| I could retire on 3 million right now.
| moritonal wrote:
| I have to ask, if they have access to get a loan of $2.2m
| then the friend could likely save for 5-7 years and just
| retire someplace cheap. Like, spending that much seems
| wild given the implied access to straight cash.
| bravesoul2 wrote:
| Yeah but let's keep the ponzi going people!
| zeroonetwothree wrote:
| But you can always sell the house later if you want to
| retire somewhere cheaper. It's not like you losing the
| money forever.
|
| You do have to pay interest taxes and maintenance,
| whether that exceeds the rent for an equivalent property
| is another question.
| Thorrez wrote:
| Here's a $2M 4-3 2279sqft very-nice-looking home in Santa
| Barbara:
|
| https://www.zillow.com/homedetails/5436-Agana-Dr-Santa-
| Barba...
| AceJohnny2 wrote:
| offtopic, but I love comparing realtor glamour shots
| HDR'd out the wazoo with StreetView
|
| https://maps.app.goo.gl/2aEXsdH9hU3o4SZw5 (winter, March
| 2012)
| ikari_pl wrote:
| Still not bad
| wiz21c wrote:
| so much space lost to cars...
| gertlex wrote:
| Aside to the offtopic: I'm surprised the google street
| view footage is 13 years old.
| fsckboy wrote:
| that's not a glamour shot, that's just a sunny day. the
| dirty little secret of the southern california coast is
| it is cloudy more than half the time. west la, downright
| depressing. they call it "the marine layer", i call it
| cloudy as fuck.
| caminante wrote:
| You're making his point.
|
| 4br in only 2k sqft? For 2M? Please...
| bravesoul2 wrote:
| Yeah they been printing alot of $
| cpursley wrote:
| I don't get it, at this point you move to Baja or
| Portugal (for similar climate) and live like a king
| without ever having to work again (unless you want to).
| Or a cheaper east coast state if you wanna stay in the US
| on the coast and have access to to all the same fast food
| and Walmarts.
| david38 wrote:
| His stupid idea to buy in a place that has gotten more
| expensive than almost anywhere in the country.
|
| I can cry that my dream flat in London is more expensive
| than I expected 30 years ago but that just shows how
| stupid I've been the last 30 years
| socalgal2 wrote:
| $3m cash will get you a house that you have to still pay
| $60k-$100k a year to stay in property tax and maintanence
| bigmattystyles wrote:
| $3m mortgage as well
| vkou wrote:
| Property tax rate in SF caps at 1.38%, which would be
| ~$40,000/year. How are you spending $60,000/year, every
| year, on maintenance and insurance? Are you saving up for
| a new solid gold roof for every decade?
| zeroonetwothree wrote:
| My average has been around $30k/yr but my house is worth
| well under $3m so I could see it being closer to $60k. I
| do include some remodeling in that figure, but things
| wear out and you aren't going to want to live with a
| decrepit interior in your $3m house...
| ivape wrote:
| _Then after his 3 month vacation to Italy, he came back
| driving his new Ferrari._
|
| Hey, at least he's taking his LARPing as a douchebag ceo
| seriously. Easy vip invite for DND nights.
| Hikikomori wrote:
| Paid more taxes on RSUs than I'm going to get post IPO.
| Company took investments on insane COVID valuation and then
| needed more money posts COVID which tanked it.
| cornholio wrote:
| The basic idea is that you either have stock, preferably
| founder levels from 10% up (which is itself a lottery
| ticket), or you hold retiree bingo cards. The retirement home
| provides the cards for your entertainment, but the real
| owners of the establishment, the founders and early
| investors, know the only way you can earn the big prize is at
| their expense, so they have a vested interest to see you fail
| - and they are the ones printing the bingo cards and setting
| the rules.
| jjice wrote:
| I had some RSUs from a previous company (likely will not be
| worth anything) and some options at another, but I have no idea
| how to understand how dilution like this works. My
| understanding is surface level of that scene in The Social
| Network.
|
| I feel like I understand _what_ an RSU is and what options are,
| but are there any good resources for me to learn from?
| baq wrote:
| RSUs are much better than options, they're actually properly
| shares, will go to zero when the company is bankrupt and even
| then not necessarily.
|
| Options go to zero much more often.
| fragmede wrote:
| Dilution is where things get fucky.
|
| So you're working at this startup. Lets say it's worth $10
| million. To make things simple, in this company, there are 2
| people, the fucker, the CEO, the guy that started it all. He
| holds 90,000 RSUs, each worth $100, so $9 million, and the
| fuckee, you, who holds 10,000 RSUs, each worth $100, for a
| cool million.
|
| Here's where the fucker fucks the fuckee, ie you. The company
| does a round, and then creates, out of thin air, a billion
| shares (1,000,000,000), and issues them to the new investors.
| Lets say the company reached unicorn status this round, which
| is to say a valuation of a billion.
|
| Holy hell a billion! But wait now there's 1,000,100,000 total
| shares out there, and the valuation of a billion, divided by
| the new shares, means that each share, of which you only have
| 10,000 of, is now worth just under one dollar.
|
| That's right, your $1 million just turned into $10,000. Which
| isn't nothing, I'd love to come across a random $10k I didn't
| know I had. But that's just, like, one really nice vacation
| for you and the kids, which you haven't seen enough of
| because you've been working so hard at this startup, and not,
| like, a college fund for the kid that's showing aptitude at
| engineering and that you were hoping was gonna go to MIT.
|
| Dilution is inevitable, there's no avoiding it. The scenario
| I presented is just to show you an example of how dilution
| fucks you. If things go well, would you rather have 10% of $1
| million or 0.1% of $1 billion?
|
| For more, it depends on how you like your information.
| ChatGPT's got stuff like ISOs vs NSOs pretty well covered,
| Investopedia's got a lot of good stuff if you'd rather it
| that way.
| Xylakant wrote:
| You are misrepresenting how dilution works - and dilution
| usually is not what fucks you. Dilution is fairly
| straightforward - someone ponies up money and gets a share
| of the company. The valuation that gets handed around is
| usually what's called "post money" - how much is the
| company worth after investors have paid in their money. In
| a simple example, matching your numbers, a company that is
| worth 10 million, with 10 million shares, each valued at 1
| dollar with a 90/10 split finds someone who invests a
| billion dollars at 1 dollar per share. These shares are
| created as part of the acquisition. The value of the shares
| doesn't change - the company, post money, now is valued at
| 1 billion 10 million and has 1 billion 10 million shares,
| each worth 1 dollar. It also happens to have 1 billion in
| cash at hand. No change in value for anyone here, but
| dilution happened - the person that owned 10% of the
| company pre-investment now only owns 0.1% - but the value
| of each share is still the same, which means they still own
| the same number of shares, each at the same valuation with
| the same total value.
|
| The problem tends to be elsewhere - as part of the deal,
| the investor asked that his share get preferred treatment
| in the next round - a liquidation preference which grants
| them the right to first take their investment of the table
| and then, whatever is left is distributed. The company gets
| sold for 1 billion. The investor takes the billion that
| they invested off the table. There's nothing left to be
| distributed. Your shares are suddenly worthless - just as
| the founders.
| tlogan wrote:
| This is a brilliant move by Google: it makes joining any AI
| startup even less appealing.
|
| Stock options were always a lottery. But this takes the
| shenanigans to a whole new level.
| jahewson wrote:
| Pro tip: do both.
| bravesoul2 wrote:
| If you are gonna do that just work for a FAANG really right?
| closeparen wrote:
| Working at a startup pretty much always involves trading off
| money in the bank for other things. That's the industry's whole
| deal. Which is why I stay in Big Tech with liquid RSUs.
| skybrian wrote:
| When people give you a percentage (1%), that is a ratio and they
| are not telling you either number. So, that makes me a little
| suspicious. I wonder how much he got in the end?
| xvector wrote:
| It doesn't really matter if he got less than what the
| acquihired founders did proportionately to his percentage.
| cleandreams wrote:
| My base salary was fine but the magic was in the stock.
|
| I got a payout on acquisition by a FAANG+ (as first employee). It
| was only 300K but I put 50K of that into Nvidia. Actually I
| invested all my payout from my startup stock into tech stocks.
| And I got a terrific golden handcuffs deal.
|
| After that I could afford to retire and I did.
| another_twist wrote:
| Did you also post this recently in Blind ? If it is so you
| might want to fuzz the numbers a bit.
| cleandreams wrote:
| Less than 10 years ago but not recent.
| saagarjha wrote:
| What I find amusing is that YC's Garry Tan is going around
| explaining to Prem how he actually got a good deal and that the
| Windsurf founders were very generous to their early employees.
| Meanwhile from his perspective he joins a company with friends
| he's known for years, takes on basically the same risk that the
| founders did, probably gets some fraction of the equity they did
| for that work (10%? Less?) and then when payoff time comes he
| gets cheated out of that too.
|
| If I was a venture capitalist dependent on 20-somethings
| believing in the dream I sold them maybe I wouldn't write snarky
| replies on them on Twitter when this happens and actually look
| into fixing things for early employees (like, maybe, giving them
| similar terms that the founders get), but that's just me I guess.
| dragonwriter wrote:
| He has just as much financial interest in the dream being false
| as he does in people believing it, which your recommendation
| seems to overlook.
| chambers wrote:
| https://x.com/ahmaurya/status/1948491614160122308 Garry Tan
| posted "sounds like a tweet that cost $20M" which he later
| deleted.
|
| Smells like a strong bias against employees in favor of
| management and founders.
| gsibble wrote:
| That was really shady.
| JumpCrisscross wrote:
| Could you expand what's going on there?
| chambers wrote:
| My read was that Garry Tan implied "you sacrificed a lot of
| money in order to grandstand". I felt that was a knee-jerk
| dismissal of a founding employee's legitimate concern.
| WatchDog wrote:
| I'm not sure, but my interpretation is that Gary is implying
| that Prem Qu Nair received $20 million from the deal, and
| that by posting this tweet, he has violated the terms of the
| agreement, which generally have non disparagement clauses,
| and Gary will see to it that he won't receive anything.
| Lionga wrote:
| That is YCombinator & Garry Tan for you. Disrupting the
| screwing over employees (and founders if they can but its just
| much harder) as a sport.
| czbond wrote:
| I believe Tan's words were mis-represented. I believe he is
| saying that it cost Prim $20M and he then wrote that post. I
| don't think he is insinuating anything else.
| Invictus0 wrote:
| He's misrepresenting his own words when he writes a vague
| tweet like that. Tan is a serial shitposter and is known for
| blocking thousands of people that even slightly disagree with
| him.
| 93po wrote:
| i read it the same way but i have no context to be confident
| in that reading
| CPLX wrote:
| When you were younger and learned about history did you form a
| mental image of what kind of people the famous financiers,
| capitalists, and robber barons were?
|
| These are those people. Oil and railroads were high technology
| too.
|
| They want you to think they're Lazlo Hollyfield, but they're
| Daniel Plainview.
| barrkel wrote:
| Tan is someone who can't handle disagreement or criticism. It
| likely leads him to live in an information bubble.
| ls-a wrote:
| Don't upset pac
| BhavdeepSethi wrote:
| I went through an acquisition very early in my career, and for
| the longest time I believed it was the best outcome for everyone.
| Over time, I realized that my naive belief was purely due to the
| founders going way above and beyond to make sure each and every
| employee (including folks doing just data entry) got a good
| outcome (accelerated vesting, significant equity in new company,
| top of the band pay, etc.). It made me realize that if you ever
| want to work at a start up, bet on the founder, rather the
| company. Even with mediocre outcomes, you'll end up ahead in the
| long run compared to folks who're just looking out for
| themselves.
| rhyperior wrote:
| They must have had a strong position from which to negotiate
| those favorable terms, in addition to the experience to know to
| do so, and the integrity to actually do it. The type of people
| you should follow.
| BhavdeepSethi wrote:
| I don't believe they did. This acquisition was by Flipkart,
| the poster child startup in India, who had a very high bar
| for hiring. They wanted to interview the non-founders to make
| sure they met the standard. The founders said you get all or
| you get none. To be fair, it was a small team of 6-8
| employees, so I doubt Flipkart cared. :)
| hiAndrewQuinn wrote:
| Wait, what are the employee protections like in India that
| such a deal is enforceable? Why couldn't Flipkart just take
| them and then fire them a few weeks/months later?
| Henchman21 wrote:
| I genuinely wonder how people like yourself sleep at
| night.
| neilv wrote:
| > _due to the founders going way above and beyond to make sure
| each and every employee (including folks doing just data entry)
| got a good outcome (accelerated vesting, significant equity in
| new company, top of the band pay, etc.)_
|
| Commendable of them. That should be normal decency by leaders.
| I wonder how common it is.
| whiplash451 wrote:
| A lot of bias against startups in the comments. These are missing
| (1) how terrible the working conditions in bigco have become in
| the meantime (2) truly good startups (they exist) that pay solid
| base salaries
| toomuchtodo wrote:
| The odds are clear as day. ~90% of startups fail, and the truly
| good ones are very rare. Do small pockets of good exist? Yes,
| absolutely. But most of the startup ecosystem is convincing
| employees to grind for peanuts until founders and investors
| (whether that's accelerators or institutional) hit liquidity
| (if ever). Of course, if you find the unicorn (good comp,
| target work life balance, meaningful work [to you]), hold on
| tight and don't mess it up.
|
| https://www.marketsentiment.co/p/the-yc-report
|
| https://news.ycombinator.com/item?id=42828198
| Muromec wrote:
| Depends on a big co. You can skip all the drama try harding and
| work in a boring place too.
| xvector wrote:
| At least you get paid in bigco and you don't have to worry
| about your equity being snatched from under you.
| CalChris wrote:
| This was just a preference cliff, plain+simple. Windsurf got paid
| maybe $3B for itself. But the investors and senior management got
| their cut first. How? Well, the preferences they negotiated.
| No one really knows how the game is played The art of the
| trade How the sausage gets made We just assume that
| it happens But no one else is in the room where it happens
|
| #2 wasn't in the room when it happened. In a very real sense,
| he's lucky he got anything. Management owes a fiduciary duty to
| the shareholders and #2 is a shareholder. But negotiating the $3B
| covers that duty.
| highfrequency wrote:
| Doesn't seem that simple. They raised a total of ~$250m and
| acquisition price was almost 10x that. The preference cliff
| means that employees get nothing before investors get an X%
| return on their investment (100%, 150%, maybe 200%). After
| that, the payout should be proportional to common stock
| ownership. Surely the preference guarantee was not 10x?
|
| Would be curious to see the breakdown of the $2.4b:
|
| 1. How much to the founders in Google employment incentives
|
| 2. How much in licensing fee to the company itself
|
| 3. How of the licensing fee went to immediate payout to VC
| investors (+ employees)
|
| 4. How much got left on the balance sheet of the remaining
| company
|
| I don't understand how #3 can be so large _and_ common stock
| holders walk away with almost nothing without breaching
| fiduciary duty?
| CalChris wrote:
| The August 2024 Series C round (last of 4 rounds) for $150M
| could dilute+smoke the preference stack for any earlier
| investors of which #2 nominally was basically the earliest
| class member of. C gets preferences+participation. B+A get
| preferences+participation+anti-dilution. Common gets what's
| left which apparently wasn't much.
|
| Fiduciary duty is very low bar. Management has to act in the
| best interests of The Company, as in, as a whole. The company
| != #2. Lawyers are not taking this case.
|
| I'm certain the accounting was done properly, maybe even by a
| Perl script, and this is how it penciled out. The question
| for us stiffs is _what can we learn from it?_
| scns wrote:
| > in the room where it happens
|
| Great song from Hamilton. Sorry for being off topic.
| aspenmayer wrote:
| Lin Manuel Miranda is a poet and a scholar. Original cast
| video of the song in question:
|
| https://www.youtube.com/watch?v=e_FWUW6SnDo
| blitzar wrote:
| You got zucked.
| highfrequency wrote:
| Directly contradicts Garry Tan's post saying that all _forty_
| founding engineers got seven figure payouts from the Google
| acquisition: https://x.com/garrytan/status/1947072583092052406
|
| Even if the OP considers the full headline number of $2.4b to be
| the value of the company, and taking his "1% of fair" number as
| truth, seven figure payouts would imply all 40 founding engineers
| had >4% equity which is nonsensical.
| ohdeargodno wrote:
| Garry Tan's job is bullshitting. Lying isn't very far from it,
| and he even covers his ass with "I heard".
|
| Who did you hear it from Garry, the founder that made out with
| all the money ? Or the other VC that made a few hundred million
| from the sale and stands to gain even more if the lie of
| "founding engineers get rewarded" is perpetuated?
| b_be_building wrote:
| No, what Garry is saying DIRECTLY correlates with the outlined
| opportunity.
|
| For his assertion to be right, 40 people need to get paid out
| at least 1 million. That's 1.67% of the company or 0.04%
| evenly. Its not hard for me to image that up to 10% of this cap
| table was distributed among the 40 people.
| reducesuffering wrote:
| Hilarious that the best case positive spin highlighted is 40
| people cleared at least $1m, so $40m out of $2.4 billion and
| $240m funding. He's praising "look 2% of the payout went to
| people in the company".
|
| Nevermind that $1m over ~4 years is approximately the same as
| the differential other public tech co's pay. ($150k + equity at
| YC co, $350k TC at G/Amzn/FB/Uber/etc.) So when they tell
| everyone they should work at YC co's, they're saying they're
| proud when in the absolute best case scenario you make just as
| much as at the public co's they rail against working for.
|
| If you want to come across as genuine, directly say how much %
| of the payout went to employees that weren't the founders. They
| won't, because it's likely 3%, which correctly sounds horrible
| umeshunni wrote:
| > the absolute best case scenario you make just as much as at
| the public co's they rail against working for
|
| that matches my experience working at 2 non-public venture
| funded companies.
| karmasimida wrote:
| Not contracting.
|
| Let's do a simple math. Assume this employee gets 5% of the
| company (which is super unlikely, but let's go with it), that
| is 150m for what could be worth if OpenAI deal went through. 1%
| of that would be 1.5m.
|
| That is still 7 figure. But this person spent 3 years in a
| startup, which turned out to be a unicorn and super highly
| successful, and he bagged a FAANG salary man pay at the end of
| the deal.
|
| Basically this just proved startup model for normies are
| completely broken, if your goal is money, don't join a startup
| xvector wrote:
| It's bizarre to see tech bros, YC, and megacorporations kill
| the startup talent pipeline that they rely on so much.
|
| Who is gonna want to work at a startup in a non-founder role
| after this and Scale AI?
|
| This continuing degradation of, and flagrant disregard for
| social norms is destructive for society.
| notimetorelax wrote:
| Young engineers who don't know how this works yet.
| anon191928 wrote:
| I will make them this then. I will inform new talent
| about how VC lies with puting all proof too. New website
| and SM coming for this
| karmasimida wrote:
| I think we would be back to historical norm, that startup
| will start falling behind in attracting talents.
|
| The founders of Windsurf had already gotten their bags,
| they won't have to work a single day later in their life if
| they don't want to. The consequences will be bared by the
| ecosystem.
|
| For the time being I think they are going to be OK, the
| labor market is employer friendly.
| baq wrote:
| the market doing what the market does: price discovery.
| yes, this is a cynical take, but so is the money in this
| market.
| lotsofpulp wrote:
| This is not a new dynamic. This situation has existed for
| 10+ years, you can even read the same comments in the same
| HN threads from 10 years ago.
|
| Equity is only to be valued at greater than $0 if the
| business is publicly traded.
| highfrequency wrote:
| Yes, but 40 people cannot each have 5% of the company.
| Dylan16807 wrote:
| Nobody said _all 40_ of those engineers got 1% of fair.
| michaelt wrote:
| _> 40 founding engineers_
|
| _Forty_ founding engineers? Seriously?
|
| They must have a very expansive definition of founder.
| bloodyplonker22 wrote:
| "Founder" and "founding engineer" are two entirely different
| things. One of those phrases is a glorified substitute for
| "early engineer". Kind of like when you buy a "founders
| edition" Nvidia GPU. You are certainly not a founder of
| anything.
| Rexxar wrote:
| 'Founding engineer' is the new 'Vice president'
| recursivecaveat wrote:
| Why would you believe extremely motivated hearsay from Garry
| Tan? The man is already very untrustworthy before we get into
| the "I heard" and conflict of interest.
| WatchDog wrote:
| Garry Tan allegedly replied to this tweet, but later deleted it
|
| https://x.com/dvassallo/status/1948635445233156239
| ensignavenger wrote:
| It is possible that 7 figure number included the offer to join
| Google, and since this engineer didn't accept that offer, they
| would not have recieved the compensation for doing so. It
| sounds like Garry Yan was getting his information second hand,
| so it may not include all of the context.
| ww520 wrote:
| That's why founding engineers are such a raw deal. They take just
| as much risk as the founders but much less payout. Also on the
| hook to do most of the work.
| doctorpangloss wrote:
| It's complicated. The difference between a founder and founding
| engineer - I think you mean early employee - is pretty big. The
| fact that they are getting a "raw deal" in your POV should
| inform you that the equity grants are not related to risk.
|
| This is coming from someone who programs for a living: contrary
| to what you are saying, the money guys take too little equity.
| The money guy being, the reason you are raising money at all,
| and not just dipping into your own savings.
| achierius wrote:
| No. The engineers build the product. They do the actual work.
| Let's flip your 'reason' around: the engineers are the reason
| the VCs have a job at all, since the entire point of the job
| is to find people building big things and funding them to get
| a cut. They are secondary, the actual product -- and the
| people who build it -- are what matters, morally and
| economically.
| thedevilslawyer wrote:
| An engineer in a non-startup also builds the project and
| does the actual work. It's not special. Trading money and
| opportunity cost for sweat is what makes it equity.
|
| Also, engineers are not the reason VCs have a job.
| mikert89 wrote:
| actually the big scam is the difference is not big at all,
| alot of times founding engineers do more work than the CEO. a
| startup that raises 1-3 million alot of times doesnt even
| have revenue. sometimes its just that the founder went to
| stanford, hires engineers, gives them lottery tickets, and
| hopes they produce good work
| jacquesm wrote:
| Always, always think about the downside scenarios if you enter an
| agreement. If you don't you will end up regretting it for sure.
| siliconc0w wrote:
| These stories really kill the golden goose because it means a lot
| of talent just won't work at a startup.
|
| YC isn't particularly great here either, they are pro founder but
| not pro startup employee. Most YC companies offer pretty paltry
| equity to even the first few hires - and that is even assuming
| you aren't going to get screwed down the line.
| Yeul wrote:
| The people who go to work for start-ups are usually young.
| There comes a certain time in life when you have a family that
| relies on you and you get old enough that you start to make
| plans for retirement.
|
| That's when you get a real job at a very boring stable company
| and stop being delusional.
| dom96 wrote:
| Not everyone decides to have a family. For some getting that
| boring and stable job is the only way to get to take some
| risks later in life.
| pimeys wrote:
| Well, that depends. I'm working in a startup and I'm in my
| 40's. Although it's a bit different than a typical startup,
| because it pays quite well compared to 95% of other offers in
| EU to live a very comfortable life in a not too expensive
| European city.
|
| Yeah, the hours can be crazy but not too often. Yes, you're
| expected to give your best all the time but that's part of
| the fun. And the best part is the challenges are always
| interesting.
|
| Maybe it makes it easier for me that I'm not at all
| interested in normal family life and never want to have kids.
| bwfan123 wrote:
| The risk-reward equation for startups vs boring-big-tech has
| turned completely upside-down. Back in the day, startups were
| the only lottery ticket to riches, not to mention do
| interesting work. But now, the tables are turned. For
| experienced engineers big-tech comps are attractive enough to
| put up with the office politics, and if you lucky do some
| interesting work.
| ada1981 wrote:
| Can someone help me understand why he would have to take this
| deal and not just say "no thanks"?
| suralind wrote:
| Can someone explain how that worked? How was the CEO allowed to
| sell license AND talent to another company? Wouldn't that screw
| investors? Why would they allow it if their stock becomes
| worthless after that?
| NooneAtAll3 wrote:
| were*
| rectang wrote:
| I feel like there needs to be the analogue of open source
| licenses for equity offers. Something standardized, so that both
| employees and management could negotiate in good faith with high
| confidence that the terms are as advertised.
|
| Because right now, there has been too much innovation in ways to
| screw over employees and the only reasonable assumption is that
| equity will vanish.
| Sephr wrote:
| For some startups (mostly dealing with local and self-hosted
| software), it may be a better option to offer perpetual license
| grants to the product being worked on as opposed to equity in
| the startup itself. This encourages employees to make the best
| software if they know that they are also going to be the end
| user as well.
| flappyeagle wrote:
| The thing they don't tell you about joining startups is: the
| integrity of the founders matters more than anything else.
|
| If you're not a good judge of people you should work somewhere
| that pays cash
| qkhhly wrote:
| i had many startups reaching out over the years but i just could
| not make the numbers work to make the shift.
|
| it's not uncommon that a regular salary from a big tech in the
| bay area would amount to ~$2M total after 4 years (considering
| stock appreciation).
|
| if you were given 1% of equity of the startup then start up has
| to worth $200M after 4 years. or more likely you would be given
| 0.1% of equity of the startup, and then it has to worth more than
| $2B, in order for it to make sense for you.
|
| how likely is that going to happen?
| _jab wrote:
| The details here remain unclear to me, and even this tweet is
| somewhat vague.
|
| > I was given an offer that would explode same day. I had to
| forfeit all of my vested shares earned over my 3.5+ years at
| Windsurf. I was ultimately given a payout of only 1% of what my
| shares would have been worth at the time of the deal.
|
| Was forfeiting the vested shares conditional on accepting the
| offer, or did he have no choice over the matter? Was the payout
| what he was offered as part of accepting the deal, or was that
| his consolation for not accepting it? The wording is genuinely
| unclear to me.
|
| I literally see 3 interpretations here:
|
| 1. Offer was to forfeit shares in exchange for 1% payout, but OP
| rejected and still has shares
|
| 2. Offer was to forfeit shares in exchange for undisclosed
| payout, but OP rejected and got 1% payout instead and still has
| shares
|
| 3. He had to forfeit shares regardless of accepting offer, got 1%
| payout
|
| (1) and (3) are both shitty offers from Google, but (2) is
| reasonable. Exploding offers are not uncommon in tech
| acquisitions. My guess is that (2) is what happened, since that's
| not in contradiction with prior reporting.
| itake wrote:
| what are those shares worth with the company gutted? Seems like
| not much of a choice if leadership and IP are gone...
| _jab wrote:
| The company should have been worth at least the cash it had
| on hand, which has been reported as ~$100M. It's also been
| reported that all vested equity and VC shares were bought out
| (although apparently perhaps with a few exceptions for people
| who declined the offer), which meant that the employee
| unvested equity stakes were "undiluted" from whatever they
| were before (hard to judge, but maybe 5-10%), to 100%. So
| every employee had their stake in the company increase
| 10x-20x. So if the company had then decided to simply close
| up and distribute the remaining cash as dividends to the
| employees, it would be as if each employee had simply been
| bought out pre-deal at a $1-2B valuation. And that was the
| absolute worst case scenario - clearly Windsurf found a
| better deal with Cognition.
| bravoetch wrote:
| Since others are sharing their doom and gloom stories - Mine is
| the opposite. I was hired at a startup, and I didn't even know
| what a startup was. I just liked the industry they were in and
| applied to join.
|
| In negotiations I tried to get more salary, by taking less
| equity. It kinda worked, but later they doubled my equity to
| match other hires of the same era (but with a new vesting
| schedule for the new options). Then at some point I was fired
| without reason. The company went on to become worth a lot, and I
| was able to get out with enough to never work again and live
| pretty luxuriously. AFAIK others that were in my era at this
| startup did equally well, or many times better. It can happen,
| but I didn't ever think it was even possible because I didn't
| understand what 'options' even were when I was hired.
| im_down_w_otp wrote:
| That stinks. I'm sorry. The founders could have taken part of the
| proceeds to at least adjust your upside with a transaction bonus.
| It's pretty easy to do.
| tlogan wrote:
| When joining a startup, the most important factor isn't the idea,
| product, or the VCs: it's the founder(s).
|
| Think like an investor. Would you back this person? Are they
| ethical? Are they resilient?
|
| Also stock options should not be high on the list. Most startups
| fail before founders or VCs even get the chance to screw you
| over. In 99% of cases, nobody wins.
| iblaine wrote:
| Having been aquihired three times by FAANG+, the biggest take
| away is have accelerated vesting. To do that you got be lucky or
| in the C-suite. Being bought out usually sounds better then
| reality for everyone but a few that get that accelerated vesting
| clause.
| anonzzzies wrote:
| Every time... The salary or fee what you trade your life for,
| shares might multiply that. Might. If your base salary is low
| 'because you have shares', you will probably never see a return:
| the idea this is loyalty or something is some weird thing; don't
| do it unless you love it and want to spend that life blood
| without a return.
| kome wrote:
| this is something that my feeble European brain will never
| understand: why people in American start-up keeps getting scammed
| with pseudo "private" equities, stock options, that are not on a
| market, and therefore cannot be priced? equities surrounded by
| very obscure (or no) legislation, that if you get fired or
| decided to leave you cannot keep. it just make no sense but
| americans loves them.
| tjpnz wrote:
| If you've convinced yourself that layoffs are a normal (and
| accepted) part of a career you'll have no issues believing in
| this crock either.
| dfadsadsf wrote:
| European salaries are laughably low even compared to low ball
| offers from US startups.
|
| Essentially options for good (but not great) sr engineers are
|
| 1. Get 120k salary in Europe (on higher end)
|
| 2. 500k at FAANG in US (salary + RSU)
|
| 3. ~200k at startup in US + lottery tickets
|
| Both option 2 and 3 strictly beat option 1 (especially after
| taxes) so European should get off the high horse and recognize
| reality that they are poor and exploited by companies and
| government.
| AYBABTME wrote:
| So if one was to start a company today and wanted to enshrine
| employee-and-founder-friendly terms in their company, how should
| things be structured? Make the founders' shares be of the same
| class as the employees? Something special?
| Nemo_bis wrote:
| Make it a cooperative. https://tech-coops.xyz/
| positron26 wrote:
| Holy shit. We need need better early phase governance tools than
| handshakes and winks. The SAFE was written to streamline things
| so that everyone can get to work right now with a reasonable
| basis of trust. How can we have that basis of trust among
| founders and early hires when stuff like this happens?
|
| If no founders can be trusted, sweat equity partnerships will
| become rare. If the only people who can build companies are VC
| funded founders who hire employees who treat the whole thing like
| a game, there will not be a good crop of companies to come out of
| that environment.
|
| Founding is freaking hard. It needs to be reliably and fairly
| rewarded. Otherwise the people trying to bootstrap and make
| things happen have nowhere to go if the idea they are completely
| convinced MUST be built is also a hard hard sell to VC hive
| minds... because it's too oddly shaped (innovative).
|
| We all have an interest to put the instruments and paperwork into
| place to make stories like this NOT happen so that sweat equity
| startups founded on personal convictions and strong cooperative
| incentive alignment will happen.
|
| https://positron.solutions/careers
| catoc wrote:
| He elected to move on before his shares were vested.
|
| Many interesting, and probably true, replies about investors
| cheating out employees, but it seems very few people read the
| actual post.
| deanmoriarty wrote:
| Where can I real the actual post you are mentioning? The tweet
| only mentions "had to forfeit all of my vested shares earned
| over my 3.5+ years at Windsurf", which seems to conflict with
| your "before his shares were vested" statement.
| tzury wrote:
| AI companies paying $100M+ for a single hire is like Tesla buying
| oil fields.
| Oras wrote:
| The comments here taught me about startup acquisitions more than
| any article/video I have watched in the last 5 years.
|
| Deep appreciation to everyone who shared their story, thank you!
| burnt-resistor wrote:
| Most early employee equity has the worst liquidation preference.
| It's almost always toilet paper.
| bravesoul2 wrote:
| Title should be changed. Sounds like this was a choice not a
| fuckover.
|
| That said...
|
| Don't be a fool for all these AI startups that want you to burn
| out on 100 hour weeks. Many YC and non-YC startups are using this
| bravado based hiring strategy trying to get cheap labour to fuel
| their rockets to the moon. Don't be no fool!
| Dylan16807 wrote:
| The value of the options was destroyed in the deal. He had a
| choice between getting 1% or getting nothing.
|
| It was a fuckover.
| rml wrote:
| The classic article on this topic is
| https://steveblank.com/2019/04/10/startup-stock-options-why-...
|
| Nothing has substantially improved since the article was written.
| With "forever private" companies it's only gotten worse.
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