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Realistically, with all the various ratchet terms in Snap's financing, how many of the 2k employees will see very significant income from the IPO? By very signi

Realistically, with all the various ratchet terms in Snap's financing, how many of the 2k employees will see very significant income from the IPO? By very significant, I mean >$150-300k per year in wealth creation adjusted for # of years it took to vest. I honestly suspect not too many. A majority of the money that people will earn will just offset the difference in salary between Snap and larger more established companies that give out liquid RSUs - like Google. Plus Snap significantly backweights their equity. So the people who can cash out on all of their equity are a small percentage of the 2k employees (since it's still such a young company) and most employees probably haven't vested the full 4 years. Still, the IPO will have an impact on the local economy - but probably not as much as is being purported. Maybe someone with more experience in large financial liquidity events like this can chime in?

GuiA 10y ago
Zach Holman recently blogged about this: I saw GitHub’s valuation move from sub-$10M to more than $2B; beyond that, GitHub is turning a decade old this year. Traditionally, this would be a great point where lots of little companies get spun off from this created wealth, and employees and former employees would be able to help with that. In reality, I can probably count on one hand the number of people from GitHub who are in a financial position to become true angels. This is far from a problem unique to GitHub; the entire industry is concentrating its cash in a select few. https://zachholman.com/posts/slow-exits https://zachholman.com/posts/slow-exits HN discussion: https://news.ycombinator.com/item?id=13655855 https://news.ycombinator.com/item?id=13655855
- econner 10y ago
  I thought his point was just that GitHub is still private. Snap going public is a different situation.
- abalone 10y ago
  Holman was writing about slow exits, and how they keep employees illiquid and even claw back equity from those that leave. Snap is not a slow exit. It may or may not produce a bunch of millionaires but it's definitely not what Holman was complaining about. In fact he would probably praise them for going public ASAP, like the old days.
  - GuiA 10y ago
    Mmh. Yes, but I think the two are two sides of the same coin. Not only are exits rarer, but the companies who do exit produce fewer people who are then in a position to keep the innovation cycle going. Holman touches on a few reasons why in his post: "...concentration of wealth, and legal stipulations like gnarly 90 day exercise windows".
    - abalone 10y ago
      The exercise window is a non-issue after a company goes public. That's his main complaint about what's keeping wealth tied up.
bogomipz 10y ago
Can you elaborate here on what you mean? I didn't follow this sentence: >"A majority of the money that people will earn will just offset the difference in salary between Snap and larger more established companies that give out liquid RSUs - like Google." I agree with you though, its not even just the full 4 year vesting schedule either because there's usually a 1 year cliff before the 1st year of vesting begins. And then of course for worker bees there's a 6 month lockup period where they can't sell while the fat cats are getting rich by selling on the day it opens.
- econner 10y ago
  The idea is that employees accepted a lower salary in exchange for the chance to earn more through stock from an eventual liquidity event. They're arguing that the gain from the liquidity event is just enough to make up the difference in salary.
  - bogomipz 10y ago
    Sure, that makes sense. I guess I didn't understand was comparison to Google and RSUs. Is it that Googles RSU are more like incentive bonuses?
    - Game_Ender 10y ago
      They are so liquid and predictable they are essentially just more salary. So a startup needs to not just have good equity, but great equity.
- askafriend 10y ago
  I'm basically saying that for the majority of employees at Snap who accepted a far more risky (illiquid) compensation compared to Google/FB's entirely liquid compensation - this IPO for Snap will simply make up that difference more or less. If someone is good enough to get a $1mm stock option package at Snap, then if you divide that by the 4 years that it takes to vest, the difference between taking a job at Snap and pulling in a big Google compensation package isn't too far off. $1mm/4 = $250k per year - $Tax = something that RSUs at Google could have accomplished with far less risk. The real life changing amounts of money are going to very few people in the org.
hkmurakami 10y ago
With a $20B valuation, With straight up ownerships having a couple of bps would do it. How many people out of the 2000 have 0.02% of the company after its dilution? Maybe 150--200?
harryh 10y ago
My understanding is that Snap's financing terms have actually been very good. The 2 co-founders each still own over 20% of the company each which is pretty exceptional. I'm fairly certain that some of their financing even involved selling common (not preferred) stock. A 20B+ exit (assuming that's where it ends up) is a pretty phenomenal success. That's 2 million bucks (well above your target) per basis point. A pretty huge chunk of the org in traditionally highly compensated roles (product, design engineering, and kind of management roll, etc) will do very well. You are underestimating how big of a success this is (again assuming that the IPO goes well) for Snapchat stockholders.
- econner 10y ago
  These numbers make sense to me. What I wonder though is if Snap goes the way of Twitter and winds up halving in valuation by the lockup period expiration. Is it still $1 million per basis point? Or will ratchets kick in that further dilute employees and drive the value down?
  - harryh 10y ago
    Any unusual financing terms almost always get resolved at the time of exit/ipo. Also, again, my understanding is that Snap had very clean financing rounds so this isn't a big concern here to begin with.
  - hkmurakami 10y ago
    All the preferred shares convert to common at IPO so no.
- giarc 10y ago
  VCs and directors (14 people) own 58% of Class A, 30% for Class B, and Evan and Rob have 100% of Class C stock. I'm not sure what was in the option pool for early employees. Evan and Rob took some money off the table in earlier rounds I believe.
abalone 10y ago
About 80% of Snapchat's employees were added in the past 18 months, so you're setting a pretty high bar by implying most need to see >$150K/year to be better off than joining Google. The earlier employees that took on significant risk are a lot more likely to see that kind of money, and thus become the next angels.

GuiA 10y ago

Zach Holman recently blogged about this: I saw GitHub’s valuation move from sub-$10M to more than $2B; beyond that, GitHub is turning a decade old this year. Traditionally, this would be a great point where lots of little companies get spun off from this created wealth, and employees and former employees would be able to help with that. In reality, I can probably count on one hand the number of people from GitHub who are in a financial position to become true angels. This is far from a problem unique to GitHub; the entire industry is concentrating its cash in a select few. https://zachholman.com/posts/slow-exits https://zachholman.com/posts/slow-exits HN discussion: https://news.ycombinator.com/item?id=13655855 https://news.ycombinator.com/item?id=13655855

econner 10y ago
I thought his point was just that GitHub is still private. Snap going public is a different situation.
abalone 10y ago
Holman was writing about slow exits, and how they keep employees illiquid and even claw back equity from those that leave. Snap is not a slow exit. It may or may not produce a bunch of millionaires but it's definitely not what Holman was complaining about. In fact he would probably praise them for going public ASAP, like the old days.
- GuiA 10y ago
  Mmh. Yes, but I think the two are two sides of the same coin. Not only are exits rarer, but the companies who do exit produce fewer people who are then in a position to keep the innovation cycle going. Holman touches on a few reasons why in his post: "...concentration of wealth, and legal stipulations like gnarly 90 day exercise windows".
  - abalone 10y ago
    The exercise window is a non-issue after a company goes public. That's his main complaint about what's keeping wealth tied up.

bogomipz 10y ago

Can you elaborate here on what you mean? I didn't follow this sentence: >"A majority of the money that people will earn will just offset the difference in salary between Snap and larger more established companies that give out liquid RSUs - like Google." I agree with you though, its not even just the full 4 year vesting schedule either because there's usually a 1 year cliff before the 1st year of vesting begins. And then of course for worker bees there's a 6 month lockup period where they can't sell while the fat cats are getting rich by selling on the day it opens.

econner 10y ago
The idea is that employees accepted a lower salary in exchange for the chance to earn more through stock from an eventual liquidity event. They're arguing that the gain from the liquidity event is just enough to make up the difference in salary.
- bogomipz 10y ago
  Sure, that makes sense. I guess I didn't understand was comparison to Google and RSUs. Is it that Googles RSU are more like incentive bonuses?
  - Game_Ender 10y ago
    They are so liquid and predictable they are essentially just more salary. So a startup needs to not just have good equity, but great equity.
askafriend 10y ago
I'm basically saying that for the majority of employees at Snap who accepted a far more risky (illiquid) compensation compared to Google/FB's entirely liquid compensation - this IPO for Snap will simply make up that difference more or less. If someone is good enough to get a $1mm stock option package at Snap, then if you divide that by the 4 years that it takes to vest, the difference between taking a job at Snap and pulling in a big Google compensation package isn't too far off. $1mm/4 = $250k per year - $Tax = something that RSUs at Google could have accomplished with far less risk. The real life changing amounts of money are going to very few people in the org.

hkmurakami 10y ago

With a $20B valuation, With straight up ownerships having a couple of bps would do it. How many people out of the 2000 have 0.02% of the company after its dilution? Maybe 150--200?

harryh 10y ago

My understanding is that Snap's financing terms have actually been very good. The 2 co-founders each still own over 20% of the company each which is pretty exceptional. I'm fairly certain that some of their financing even involved selling common (not preferred) stock. A 20B+ exit (assuming that's where it ends up) is a pretty phenomenal success. That's 2 million bucks (well above your target) per basis point. A pretty huge chunk of the org in traditionally highly compensated roles (product, design engineering, and kind of management roll, etc) will do very well. You are underestimating how big of a success this is (again assuming that the IPO goes well) for Snapchat stockholders.

econner 10y ago
These numbers make sense to me. What I wonder though is if Snap goes the way of Twitter and winds up halving in valuation by the lockup period expiration. Is it still $1 million per basis point? Or will ratchets kick in that further dilute employees and drive the value down?
- harryh 10y ago
  Any unusual financing terms almost always get resolved at the time of exit/ipo. Also, again, my understanding is that Snap had very clean financing rounds so this isn't a big concern here to begin with.
- hkmurakami 10y ago
  All the preferred shares convert to common at IPO so no.
giarc 10y ago
VCs and directors (14 people) own 58% of Class A, 30% for Class B, and Evan and Rob have 100% of Class C stock. I'm not sure what was in the option pool for early employees. Evan and Rob took some money off the table in earlier rounds I believe.

abalone 10y ago

About 80% of Snapchat's employees were added in the past 18 months, so you're setting a pretty high bar by implying most need to see >$150K/year to be better off than joining Google. The earlier employees that took on significant risk are a lot more likely to see that kind of money, and thus become the next angels.