11 ms·

No Exit

242 points by Futurebot 10y ago

tptacek 10y ago
The bit about Gowalla's Facebook "acquisition" is an important point for investors, and one I think the Crowdfunding excitement overlooks. I've sold a couple companies and been an insider in a couple other acquisitions, and many of the knobs that get turned during the negotiations are about retention/compensation plans. It's hard --- like, it actually can be a problem when trying to close the deal --- to balance employee retention and the interests of investors. Even in the best case, every dollar you're giving to current team members is an incentive for the management of the company to accept a lower sales price. In some egregious cases, one of them pretty infamous in the security world and the reason I've promised myself I won't spend real money to execute employee options, management and current team members got basically the normal proceeds of an acquisition and investors got zero.
- ktRolster 10y ago
  In some egregious cases.., management and current team members got basically the normal proceeds of an acquisition and investors got zero. That sounds like an excellent case to me :)
  - tptacek 10y ago
    You think it's excellent that departed employees who paid their own money to execute options got shafted? I don't understand that mentality.
    - ktRolster 10y ago
      You didn't say anything about departed employees.
- cperciva 10y ago
  Don't investors usually have a veto over acquisitions? I'm which case, why would they agree to a deal which was lucrative for management but valued their equity at zero?
  - beachstartup 10y ago
    probably because the acquisition would not happen at all without the employee retention, and the investors had a mandate to exit for whatever reason. or management simply hijacked the company.
    - jdavis703 10y ago
      I've been an insider in a similar deal. A lot of times it's this, or let the company go through a messy, potentially headline grabbing, bankruptcy. A lot of times in this situation the acquiring company is doing the deal for the talent, and they need to be sure the talent stays around for a while, otherwise the deal would be worthless.
RamshackleJ 10y ago
Reminds me of: https://m.signalvnoise.com/reconsider-41adf356857f#.56isp7plw https://m.signalvnoise.com/reconsider-41adf356857f#.56isp7pl...
M_Grey 10y ago
I think the author is giving people too much credit for optimism, and too little credit for the kind of thinking that has kept gambling such a profitable venture... ...for casinos. I suspect anecdotally, with no hard evidence whatsoever to back it, that the people who get into startups a lot, are the types of people who are very aware that other people have made insane fortunes that way, and they want that.
firasd 10y ago
Great points. I don't know about the 90s, but in this era, you either want founder-level equity or market salaries. There's too much uncertainty about the outcome, too many circumstances that can affect it, and too long a time window in which these circumstances can play out, for anything else. Time is an important factor here, more for employees than, say, investors because you don't have a portfolio of multiple lives. Several years of your life count for a lot; be clear-eyed about where they're going.
- Apocryphon 10y ago
  The question is, where do we figure out market salaries? Glassdoor is hardly the final authority.
  - gaius 10y ago
    Discovering the market-clearing price is easy! Just keep tweaking the offer until your acceptance rate crosses some threshold. This is how markets have operated for thousands of years! The choice to underpay and offer lottery tickets in lieu is a conscious, deliberate one by the founder/investor class, and hey, if you can't get enough suckers from amongst the Workers you can always lobby Congress to increase the H1B cap and let you import some from overseas...
  - jdavis703 10y ago
    Maybe talk about this among your peer group? That's probably the most up to date and accurate way to find out what you're worth.
    - RodericDay 10y ago
      American employers have tricked employees, via eg: unenforceable legal threats, that sharing salary information is illegal, self-harming, and in bad taste.
    - jsprogrammer 10y ago
      That is what the poster is doing. Not long ago, someone from a code camp negotiated 250k total annual compensation from an SF short-term rental company.
Negitivefrags 10y ago
There is another way for equity to have some value. It's an old approach, but still works surprisingly well, and it doesn't even require anyone to buy the company or have an IPO. You can earn a profit and then pay that profit to the shareholders in the form of dividends.
- uiri 10y ago
  Dividends make sense for established, profitable businesses. They don't make sense for startups. No one wants the startup to issue dividends. The employees won't receive any dividends unless they have already paid to exercise their options and are holding restricted stock. The investors don't want to have their capital returned to them while the company is getting off the ground. They want the profit to be reinvested in growing the business. The founders are already taking a salary. It is easier for them to fine tune that than it is for them to take compensation in the form of dividends.
  - Negitivefrags 10y ago
    Okay, but at some point you need to turn from a startup into a profitable business. This whole problem stems from the fact that these startups are either unwilling or unable to actually become real businesses at some point. And that should be the actual endgame that is being targeted, and that the employees should be striving for. People seem to have lost sight of that goal.
  - hugs 10y ago
    The Indie.vc program explicitly provides a cash distribution alternative for returning capital to the investors, fwiw.
  - M2Ys4U 10y ago
    Couldn't one issue two classes of shares? Issue one class of share that is restricted from sale but earns dividends (for the employees) and one that is unrestricted but pays no dividends (for investors)?
- cft 10y ago
rdtsc 10y ago
I like the comparison to Puritanism and delayed gratification. There is something there. Even long after active religious beliefs are gone, there is a long trail of attitudes and habits which linger on. They just become part of culture. Also those institutions or individuals (owners) who can tap into those attitude and play them against others can reap great benefits. There are a bit like settings and switches already there, just have to turn them on. "Work hard and you'll be rewarded in the afterlife". In this case the "afterlife" like the article mentions is the exit event, or what used to be the IPO. This belief is useful both to the owners (the ones who control the believers), but it is also useful to the believers as well. It provides comfort and a sense of mission. That last bit is readily discarded, but I think it is a very important part in the equation. People will work 80 hour weeks at below market salary if they get to fantasize of being a multi-millionaires. Even people who think themselves beyond irrationality and silly biases (programmers in our case) will go for it. Maybe the ability to fantasize, is actually worth something. Perhaps imagining oneself a little Zuckerberg or Mark Cuban, should be worth something. You are closer to that dream by working in a startup than say working for a big corp or sandwich shop. Is that dream worth the salary cut and uncertainty? That's the question. Comparing with other countries, I wonder if there are cultures where this wouldn't work as well. And it might explain why startups just can't take off there. Let's suppose there is capital and talent but people there might ask "Yeah what's in it for me today?" and if the answer is "You can dream about being wealthy in the future". They'll say "No, thank you" more readily. It could be because of a religious background or they simply have less faith in official institutions.
- jolux 10y ago
  see also: https://en.wikipedia.org/wiki/The_Protestant_Ethic_and_the_Spirit_of_Capitalism https://en.wikipedia.org/wiki/The_Protestant_Ethic_and_the_S...
  - rdtsc 10y ago
    Thank you. Ordered it from Amazon. I've heard of it before and meant to read it, so this time will actually do it.
  - 10y ago
sumanthvepa 10y ago
As an employee the rational reaction to illiquid equity with uncertain value, would be to simply discount it and demand a higher cash compensation. This is a problem for founders and VC, but I can't see why it's a problem for employees. If comp is bad they just walk. It's not like a good engineer can't easily land a job.
blazespin 10y ago
The thing about these is they are written by older folks who don't realize that the risk/reward calculation changes depending on how old you are. It makes sense to take on risk when you're young, and not when you're old. Pretty simple..
- gaius 10y ago
  But you are only young once.
- oneloop 10y ago
  If anything, it's the young who don't know that. The old have been young, the young have never been old.
ktRolster 10y ago
you’re never more attractive a target for firing than right before your one year anniversary [Disclosure: Tumblr fired me approximately one month before my vesting cliff.] Ouch.
akkartik 10y ago
To push back on part of the post: "Many have blamed the decline of the IPO market on regulatory changes, such as the Sarbanes-Oxley Act.. There’s another important reason fewer and fewer startups go public these days, though: acquisition by an established company is a far easier, and, often, more lucrative, exit strategy.. A few extreme outlier exceptions such as Google and Facebook notwithstanding, acquisitions have been by far the most viable exit for small tech companies since the end of the dotcom bust." Acquisitions have been more viable than IPOs for _precisely_ the same period we've had Sarbanes-Oxley. How the heck is this 'another' reason, then?
- georgeecollins 10y ago
  Let me quibble with "_precisely_ the same period we've had Sarbanes-Oxley." Sarbanes Oxley passed in 2002. IPOs increased from 2002- 2004. Source: https://www.quandl.com/data/RITTER/US_IPO_STATS-Historical-US-IPO-Statistics https://www.quandl.com/data/RITTER/US_IPO_STATS-Historical-U... I suspect that Sarbanes-Oxley did suppress IPOs but if you can't think of some other reasons for fewer IPOs. I will offer some: - Much more capital available in private markets from hedge funds, sovereign funds, etc. Think of how much money Uber can raise today as a private company. That didn't used to be possible. - Tech companies have really resisted offering dividends because they are believed to be tax inefficient and a sign that those companies can't grow and invest. So instead they have huge amounts of cash on their balance sheet that they need to invest.
  - gaius 10y ago
    SOX is trivial if you are a large public company, you just spin up a dedicated group to deal with it, for some rounding error of your cost of doing business anyway. It is much harder for a small public company. But I believe it kicks in anyway if you are a large private company with >50 shareholders, so there is that to consider too...
  - akkartik 10y ago
    Ok, it seems you know more than me about this so let me try to poke holes in an attempt to learn further. Was there really more capital available in private markets before 2008? I thought that was just because of post-2008 QE. That timing doesn't seem to work either. Didn't Microsoft have billions in cash on its balance sheet in the 90's? I thought tech companies always hoarded cash when they were cash cows, and that it was at least partly a consequence of tax regulation, with cash sitting in one jurisdiction (say Ireland in recent years) costing too much to move around. The fact that the delta in IPOs went up doesn't necessarily seem so indicative. There's a holding capacity for IPOs in an economy. I think your graph shows just how far the holding capacity dropped after SOX.
gravypod 10y ago
"These industries are a rich source of e - KYC(know your customer) data. Airlines alone served 2.8 billion passengers in 2011. Every person who checks into a hotel has to supply" I don't think this needs to be said but if my airline stats selling where I go to advertisers I'm not going to be using that airline anymore. It's bad enough they are selling it to governments.
- pflanze 10y ago
  I think your comment was meant to go to this thread instead: https://news.ycombinator.com/item?id=12524217 https://news.ycombinator.com/item?id=12524217
andrewclunn 10y ago
I should really stop being surprised at how much productivity and work is funded through fake money. "This has value, trust me," would tip off anyone. When the "trust me" is simply replaced with a large cultural delusion it works like a charm.
caf 10y ago
RSUs are taxed as soon as they vest. This means that employees with RSU grants are continuously accumulating illiquid but taxable income based on the company’s current fair market value. This can prove disastrous for employees who have already paid taxes on RSUs whose values have declined precipitously. I wonder if you could introduce a kind of "Franked RSU" where the company pays the tax obligation at vesting (for certain agreed taxation jurisdictions)?
- hkmurakami 10y ago
  There's nothing stopping companies from handing out bonuses hat match the tax obligation.
- hkmurakami 10y ago
  There's nothing stopping companies from handing out bonuses hat match the tax obligation.
- cpitman 10y ago
  I'm no tax expert, but couldn't these losses be offset by Tax Loss Harvesting? It doesn't wipe them out, but does reduce the loss by approximately your top tax bracket.
VexXtreme 10y ago
As I'm entering the fourth decade of my life, I have actively started avoiding any company that 1) self identifies as a startup, 2) employs less than 50 people, 3) is VC funded in any capacity. It's not because I have anything against them in particular, it's just that my risk profile has been changing together with my age, and I'm not really willing to put in the same crazy hours as 5-10 years ago in return for the right to participate in a de facto lottery. Many experienced engineers I know feel the same.
- hugs 10y ago
  Would you still avoid startups if the hours were not crazy and the salary was the same (or better) as at a non-startup?
  - snovv_crash 10y ago
    Only if they have a long enough runway and I think the idea is sound.
  - VexXtreme 10y ago
    Possibly, due to a lack of long term stability and job security. When every round of financing results in a different VC installing its own people in the company and shaking things up, I don't feel comfortable betting the life and wellbeing of my family on the fact that some 24 year old "product manager" is going to act rational. In other words, they'd really need to pay me a lot more than an established company in order to offset my risk.
- wslh 10y ago
  On the other hand, I think the pleasure is to have 1) startups as a customers, because 2) It has few employees and you can quickly negotiate with them, and 3) They are funded and can quickly spend money to speed up or improve their product. Just from a risk perspective, in economic crises (e.g. 2007/2008) we had a flat line near 0 of revenue coming from startups.
- geocar 10y ago
  A company working in an unknown space, that doesn't even know how to be the kind of company it wants to be; a startup can be very exciting for an experienced engineer because (if you're like me) you do like to solve problems, and I (at least) view software as only part of the problem space (make the business money). To that, I'm willing to bring wits, flexibility, and broad experience. I bring value and justify my existence, and I do expect to be appreciated (compensated) for that; I expect to have a much higher salary than at a non-startup, not a lower salary and a lottery ticket. The sheer number of "startups" that want me to work for peanuts just tends to make me avoid the term startup. Instead I look for their investors looking for someone to help them manage their risk, and treat it as a consultancy.
chris_7 10y ago
> “Equity is critically important because it is the thing that everybody has in common. Since everyone benefits from an increased share price, everyone tries to increase the share price. I don't understand this. I have equity. I don't care about it, since I value it at ~$0.
- brianwawok 10y ago
  Did you take a pay cut to get it? If you didn't, good job. If you did, you valued the equity at market rate - actual pay, conscious or not.
Eridrus 10y ago
I have a pet compensation idea: founder shares should be soft capped at some threshold (5m a head plus a quarter of anything above that?) with the part above the cap redistributed to employee stock holders such that mid sized exits (~100m), which are significantly more common are financially rewarding for more people in the company. I don't know if this is practical, but as an early employee at a startup it's hard to not feel bitter about the massive disparity. Usually I try to avoid thinking about it.
- hashkb 10y ago
  I think the difference in risk between founders and early hires justifies an order magnitude difference.
  - Eridrus 10y ago
    So, why does risk justify a higher reward? The usual answer is that without a greater reward there is no reason to take a risk. My conjecture is that reward above a certain threshold is not actually that meaningful of an incentive when starting a company. I would be interested in hearing founders' perspectives though.
    - dilemma 10y ago
      Start a company yourself and see how you find that rule.
Roboprog 10y ago
I have limited experience with this, being in the Sacramento area, rather than the Bay Area. However, my experience back in the late 90s / early 2000s went reasonably well. I was working for a newer department in a firm owned by private equity (which had been turning modest profits in one division or other for 20 years). We were purchased by a fortune 1000 company. As a team lead and key contributor to some of the infrastructure around the place, I received a nice little bundle of options, which were actually worth a little something in a year or two. Anyway, I stuck around for a little while during the transition, eventually got fed up with the parent company's stupidity, cashed out, and moved on. The options pretty much paid for a 6 month sabbatical while I retrained. The numbers in my region sound tiny compared to SV numbers, but we bought a 3 bedroom house on an acre (in the foothills) for $140 K back in the late 90s, so you didn't need a 200K / year salary to get by. Since then, I have worked at places that either offered some kind of pension, or had significant yearly bonuses. Show me da money! :-)
bofia 10y ago
I'm an engineer at startup http://www.equityzen.com http://www.equityzen.com, which is a private secondary market that provides the alternative option of selling startup shares before an IPO or exit, rather than waiting or letting the shares go unexercised. I believe that the secondary market is becoming a much more popular option to startup employees as companies start to take notice of the current issues with liquidity.

242 points by Futurebot 10y ago

The bit about Gowalla's Facebook "acquisition" is an important point for investors, and one I think the Crowdfunding excitement overlooks. I've sold a couple companies and been an insider in a couple other acquisitions, and many of the knobs that get turned during the negotiations are about retention/compensation plans. It's hard --- like, it actually can be a problem when trying to close the deal --- to balance employee retention and the interests of investors. Even in the best case, every dollar you're giving to current team members is an incentive for the management of the company to accept a lower sales price. In some egregious cases, one of them pretty infamous in the security world and the reason I've promised myself I won't spend real money to execute employee options, management and current team members got basically the normal proceeds of an acquisition and investors got zero.

ktRolster 10y ago
In some egregious cases.., management and current team members got basically the normal proceeds of an acquisition and investors got zero. That sounds like an excellent case to me :)
- tptacek 10y ago
  You think it's excellent that departed employees who paid their own money to execute options got shafted? I don't understand that mentality.
  - ktRolster 10y ago
    You didn't say anything about departed employees.
cperciva 10y ago
Don't investors usually have a veto over acquisitions? I'm which case, why would they agree to a deal which was lucrative for management but valued their equity at zero?
- beachstartup 10y ago
  probably because the acquisition would not happen at all without the employee retention, and the investors had a mandate to exit for whatever reason. or management simply hijacked the company.
  - jdavis703 10y ago
    I've been an insider in a similar deal. A lot of times it's this, or let the company go through a messy, potentially headline grabbing, bankruptcy. A lot of times in this situation the acquiring company is doing the deal for the talent, and they need to be sure the talent stays around for a while, otherwise the deal would be worthless.

RamshackleJ 10y ago

Reminds me of: https://m.signalvnoise.com/reconsider-41adf356857f#.56isp7plw https://m.signalvnoise.com/reconsider-41adf356857f#.56isp7pl...

M_Grey 10y ago

I think the author is giving people too much credit for optimism, and too little credit for the kind of thinking that has kept gambling such a profitable venture... ...for casinos. I suspect anecdotally, with no hard evidence whatsoever to back it, that the people who get into startups a lot, are the types of people who are very aware that other people have made insane fortunes that way, and they want that.

firasd 10y ago

Great points. I don't know about the 90s, but in this era, you either want founder-level equity or market salaries. There's too much uncertainty about the outcome, too many circumstances that can affect it, and too long a time window in which these circumstances can play out, for anything else. Time is an important factor here, more for employees than, say, investors because you don't have a portfolio of multiple lives. Several years of your life count for a lot; be clear-eyed about where they're going.

Apocryphon 10y ago
The question is, where do we figure out market salaries? Glassdoor is hardly the final authority.
- gaius 10y ago
  Discovering the market-clearing price is easy! Just keep tweaking the offer until your acceptance rate crosses some threshold. This is how markets have operated for thousands of years! The choice to underpay and offer lottery tickets in lieu is a conscious, deliberate one by the founder/investor class, and hey, if you can't get enough suckers from amongst the Workers you can always lobby Congress to increase the H1B cap and let you import some from overseas...
- jdavis703 10y ago
  Maybe talk about this among your peer group? That's probably the most up to date and accurate way to find out what you're worth.
  - RodericDay 10y ago
    American employers have tricked employees, via eg: unenforceable legal threats, that sharing salary information is illegal, self-harming, and in bad taste.
  - jsprogrammer 10y ago
    That is what the poster is doing. Not long ago, someone from a code camp negotiated 250k total annual compensation from an SF short-term rental company.

Negitivefrags 10y ago

There is another way for equity to have some value. It's an old approach, but still works surprisingly well, and it doesn't even require anyone to buy the company or have an IPO. You can earn a profit and then pay that profit to the shareholders in the form of dividends.

uiri 10y ago
Dividends make sense for established, profitable businesses. They don't make sense for startups. No one wants the startup to issue dividends. The employees won't receive any dividends unless they have already paid to exercise their options and are holding restricted stock. The investors don't want to have their capital returned to them while the company is getting off the ground. They want the profit to be reinvested in growing the business. The founders are already taking a salary. It is easier for them to fine tune that than it is for them to take compensation in the form of dividends.
- Negitivefrags 10y ago
  Okay, but at some point you need to turn from a startup into a profitable business. This whole problem stems from the fact that these startups are either unwilling or unable to actually become real businesses at some point. And that should be the actual endgame that is being targeted, and that the employees should be striving for. People seem to have lost sight of that goal.
- hugs 10y ago
  The Indie.vc program explicitly provides a cash distribution alternative for returning capital to the investors, fwiw.
- M2Ys4U 10y ago
  Couldn't one issue two classes of shares? Issue one class of share that is restricted from sale but earns dividends (for the employees) and one that is unrestricted but pays no dividends (for investors)?
cft 10y ago

rdtsc 10y ago

I like the comparison to Puritanism and delayed gratification. There is something there. Even long after active religious beliefs are gone, there is a long trail of attitudes and habits which linger on. They just become part of culture. Also those institutions or individuals (owners) who can tap into those attitude and play them against others can reap great benefits. There are a bit like settings and switches already there, just have to turn them on. "Work hard and you'll be rewarded in the afterlife". In this case the "afterlife" like the article mentions is the exit event, or what used to be the IPO. This belief is useful both to the owners (the ones who control the believers), but it is also useful to the believers as well. It provides comfort and a sense of mission. That last bit is readily discarded, but I think it is a very important part in the equation. People will work 80 hour weeks at below market salary if they get to fantasize of being a multi-millionaires. Even people who think themselves beyond irrationality and silly biases (programmers in our case) will go for it. Maybe the ability to fantasize, is actually worth something. Perhaps imagining oneself a little Zuckerberg or Mark Cuban, should be worth something. You are closer to that dream by working in a startup than say working for a big corp or sandwich shop. Is that dream worth the salary cut and uncertainty? That's the question. Comparing with other countries, I wonder if there are cultures where this wouldn't work as well. And it might explain why startups just can't take off there. Let's suppose there is capital and talent but people there might ask "Yeah what's in it for me today?" and if the answer is "You can dream about being wealthy in the future". They'll say "No, thank you" more readily. It could be because of a religious background or they simply have less faith in official institutions.

jolux 10y ago
see also: https://en.wikipedia.org/wiki/The_Protestant_Ethic_and_the_Spirit_of_Capitalism https://en.wikipedia.org/wiki/The_Protestant_Ethic_and_the_S...
- rdtsc 10y ago
  Thank you. Ordered it from Amazon. I've heard of it before and meant to read it, so this time will actually do it.
- 10y ago

sumanthvepa 10y ago

As an employee the rational reaction to illiquid equity with uncertain value, would be to simply discount it and demand a higher cash compensation. This is a problem for founders and VC, but I can't see why it's a problem for employees. If comp is bad they just walk. It's not like a good engineer can't easily land a job.

blazespin 10y ago

The thing about these is they are written by older folks who don't realize that the risk/reward calculation changes depending on how old you are. It makes sense to take on risk when you're young, and not when you're old. Pretty simple..

gaius 10y ago
But you are only young once.
oneloop 10y ago
If anything, it's the young who don't know that. The old have been young, the young have never been old.

ktRolster 10y ago

you’re never more attractive a target for firing than right before your one year anniversary [Disclosure: Tumblr fired me approximately one month before my vesting cliff.] Ouch.

akkartik 10y ago

To push back on part of the post: "Many have blamed the decline of the IPO market on regulatory changes, such as the Sarbanes-Oxley Act.. There’s another important reason fewer and fewer startups go public these days, though: acquisition by an established company is a far easier, and, often, more lucrative, exit strategy.. A few extreme outlier exceptions such as Google and Facebook notwithstanding, acquisitions have been by far the most viable exit for small tech companies since the end of the dotcom bust." Acquisitions have been more viable than IPOs for _precisely_ the same period we've had Sarbanes-Oxley. How the heck is this 'another' reason, then?

georgeecollins 10y ago
Let me quibble with "_precisely_ the same period we've had Sarbanes-Oxley." Sarbanes Oxley passed in 2002. IPOs increased from 2002- 2004. Source: https://www.quandl.com/data/RITTER/US_IPO_STATS-Historical-US-IPO-Statistics https://www.quandl.com/data/RITTER/US_IPO_STATS-Historical-U... I suspect that Sarbanes-Oxley did suppress IPOs but if you can't think of some other reasons for fewer IPOs. I will offer some: - Much more capital available in private markets from hedge funds, sovereign funds, etc. Think of how much money Uber can raise today as a private company. That didn't used to be possible. - Tech companies have really resisted offering dividends because they are believed to be tax inefficient and a sign that those companies can't grow and invest. So instead they have huge amounts of cash on their balance sheet that they need to invest.
- gaius 10y ago
  SOX is trivial if you are a large public company, you just spin up a dedicated group to deal with it, for some rounding error of your cost of doing business anyway. It is much harder for a small public company. But I believe it kicks in anyway if you are a large private company with >50 shareholders, so there is that to consider too...
- akkartik 10y ago
  Ok, it seems you know more than me about this so let me try to poke holes in an attempt to learn further. Was there really more capital available in private markets before 2008? I thought that was just because of post-2008 QE. That timing doesn't seem to work either. Didn't Microsoft have billions in cash on its balance sheet in the 90's? I thought tech companies always hoarded cash when they were cash cows, and that it was at least partly a consequence of tax regulation, with cash sitting in one jurisdiction (say Ireland in recent years) costing too much to move around. The fact that the delta in IPOs went up doesn't necessarily seem so indicative. There's a holding capacity for IPOs in an economy. I think your graph shows just how far the holding capacity dropped after SOX.

gravypod 10y ago

"These industries are a rich source of e - KYC(know your customer) data. Airlines alone served 2.8 billion passengers in 2011. Every person who checks into a hotel has to supply" I don't think this needs to be said but if my airline stats selling where I go to advertisers I'm not going to be using that airline anymore. It's bad enough they are selling it to governments.

pflanze 10y ago
I think your comment was meant to go to this thread instead: https://news.ycombinator.com/item?id=12524217 https://news.ycombinator.com/item?id=12524217

andrewclunn 10y ago

I should really stop being surprised at how much productivity and work is funded through fake money. "This has value, trust me," would tip off anyone. When the "trust me" is simply replaced with a large cultural delusion it works like a charm.

caf 10y ago

RSUs are taxed as soon as they vest. This means that employees with RSU grants are continuously accumulating illiquid but taxable income based on the company’s current fair market value. This can prove disastrous for employees who have already paid taxes on RSUs whose values have declined precipitously. I wonder if you could introduce a kind of "Franked RSU" where the company pays the tax obligation at vesting (for certain agreed taxation jurisdictions)?

hkmurakami 10y ago
There's nothing stopping companies from handing out bonuses hat match the tax obligation.
hkmurakami 10y ago
There's nothing stopping companies from handing out bonuses hat match the tax obligation.
cpitman 10y ago
I'm no tax expert, but couldn't these losses be offset by Tax Loss Harvesting? It doesn't wipe them out, but does reduce the loss by approximately your top tax bracket.

VexXtreme 10y ago

As I'm entering the fourth decade of my life, I have actively started avoiding any company that 1) self identifies as a startup, 2) employs less than 50 people, 3) is VC funded in any capacity. It's not because I have anything against them in particular, it's just that my risk profile has been changing together with my age, and I'm not really willing to put in the same crazy hours as 5-10 years ago in return for the right to participate in a de facto lottery. Many experienced engineers I know feel the same.

hugs 10y ago
Would you still avoid startups if the hours were not crazy and the salary was the same (or better) as at a non-startup?
- snovv_crash 10y ago
  Only if they have a long enough runway and I think the idea is sound.
- VexXtreme 10y ago
  Possibly, due to a lack of long term stability and job security. When every round of financing results in a different VC installing its own people in the company and shaking things up, I don't feel comfortable betting the life and wellbeing of my family on the fact that some 24 year old "product manager" is going to act rational. In other words, they'd really need to pay me a lot more than an established company in order to offset my risk.
wslh 10y ago
On the other hand, I think the pleasure is to have 1) startups as a customers, because 2) It has few employees and you can quickly negotiate with them, and 3) They are funded and can quickly spend money to speed up or improve their product. Just from a risk perspective, in economic crises (e.g. 2007/2008) we had a flat line near 0 of revenue coming from startups.
geocar 10y ago
A company working in an unknown space, that doesn't even know how to be the kind of company it wants to be; a startup can be very exciting for an experienced engineer because (if you're like me) you do like to solve problems, and I (at least) view software as only part of the problem space (make the business money). To that, I'm willing to bring wits, flexibility, and broad experience. I bring value and justify my existence, and I do expect to be appreciated (compensated) for that; I expect to have a much higher salary than at a non-startup, not a lower salary and a lottery ticket. The sheer number of "startups" that want me to work for peanuts just tends to make me avoid the term startup. Instead I look for their investors looking for someone to help them manage their risk, and treat it as a consultancy.

chris_7 10y ago

> “Equity is critically important because it is the thing that everybody has in common. Since everyone benefits from an increased share price, everyone tries to increase the share price. I don't understand this. I have equity. I don't care about it, since I value it at ~$0.

brianwawok 10y ago
Did you take a pay cut to get it? If you didn't, good job. If you did, you valued the equity at market rate - actual pay, conscious or not.

Eridrus 10y ago

I have a pet compensation idea: founder shares should be soft capped at some threshold (5m a head plus a quarter of anything above that?) with the part above the cap redistributed to employee stock holders such that mid sized exits (~100m), which are significantly more common are financially rewarding for more people in the company. I don't know if this is practical, but as an early employee at a startup it's hard to not feel bitter about the massive disparity. Usually I try to avoid thinking about it.

hashkb 10y ago
I think the difference in risk between founders and early hires justifies an order magnitude difference.
- Eridrus 10y ago
  So, why does risk justify a higher reward? The usual answer is that without a greater reward there is no reason to take a risk. My conjecture is that reward above a certain threshold is not actually that meaningful of an incentive when starting a company. I would be interested in hearing founders' perspectives though.
  - dilemma 10y ago
    Start a company yourself and see how you find that rule.

Roboprog 10y ago

I have limited experience with this, being in the Sacramento area, rather than the Bay Area. However, my experience back in the late 90s / early 2000s went reasonably well. I was working for a newer department in a firm owned by private equity (which had been turning modest profits in one division or other for 20 years). We were purchased by a fortune 1000 company. As a team lead and key contributor to some of the infrastructure around the place, I received a nice little bundle of options, which were actually worth a little something in a year or two. Anyway, I stuck around for a little while during the transition, eventually got fed up with the parent company's stupidity, cashed out, and moved on. The options pretty much paid for a 6 month sabbatical while I retrained. The numbers in my region sound tiny compared to SV numbers, but we bought a 3 bedroom house on an acre (in the foothills) for $140 K back in the late 90s, so you didn't need a 200K / year salary to get by. Since then, I have worked at places that either offered some kind of pension, or had significant yearly bonuses. Show me da money! :-)

bofia 10y ago

I'm an engineer at startup http://www.equityzen.com http://www.equityzen.com, which is a private secondary market that provides the alternative option of selling startup shares before an IPO or exit, rather than waiting or letting the shares go unexercised. I believe that the secondary market is becoming a much more popular option to startup employees as companies start to take notice of the current issues with liquidity.