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> Final sale price was $97 million. > Crunchbase reports that Eero took $90 million in venture capital (the Wall Street Journal put the number at $100 million)

by shoo 8y ago

> Final sale price was $97 million. > Crunchbase reports that Eero took $90 million in venture capital (the Wall Street Journal put the number at $100 million). PitchBook, a highly accurate source of VC information, claimed a final $40 million Series D fundraising round from December 2017 brought that number up to $138 million. Eero declined to comment, instead pointing to a March 12 blog post confirming the sale. > An additional $10 million debt line Eero took out brings the total money put into the company at $148 million — 150 percent of the Amazon sale price. > after transaction costs and debt, the actual price will be closer to $54.6 million. > Amazon is covering around $40 million of the debt that Eero owes. Ex-employees believe the debt to be from hardware manufacturing costs > Eero’s Series D investors, led by Qualcomm, will recoup 84 percent of their investments. > seed round and Series A-C investors will all get back 31 cents on the dollar. Investors are taking a 16%-69% loss on invested capital. You're not going to make any money by exercising call options unless the strike price is absurdly low for some reason. The employees might have done okay if they were holding put options on the company, but alas, one's employer probably isn't going to offer one put options as some kind of incentive...

mcguire 8y ago
That's actually not a bad idea, as a backstop.
- shoo 8y ago
  I did a search for `startup "put option"` to see if there was anything written about this. There is one article arguing that major early investors should demand something vaguely similar [1] -- although it sounds like it is not designed to be triggered when a company fails and loses a lot of value, but instead perhaps when a company is partially succeeding, or succeeding but the investor wants to reduce exposure or otherwise get some cash back: > If the investor exercises the put, the investor is entitled to redeem all or a portion of his equity interests in exchange for the initial investment value plus a nominal return above the risk-free rate, yet still maintain a reduced equity position in the company–perhaps, somewhere between 50% to 75%. > To prevent the investor from exercising the put at a moment when the company’s financial stability or expansion plans could be jeopardized, the company can require that in addition to a prescribed time period restriction, certain revenue milestones must be achieved and set as “triggers” before the put may be exercised. > The put option must be structured in a way that enhances the investor’s optionality without putting the company at balance-sheet risk. It is possible to strike that balance. [1] https://www.thinkadvisor.com/2010/04/01/venture-populist-the-venture-investors-put-option/ https://www.thinkadvisor.com/2010/04/01/venture-populist-the... Another variation would be to strike a deal where put options were not written by the startup but by some other third party (an insurer or bank?), which was highly likely to remain liquid in the event that the startup went bust. This could avoid needing to constrain the use of the options with triggers & so on. On the other hand, it would be a pretty risky business for a third party to sell such things, so they probably wouldn't be cheap to buy...

by shoo 8y ago

mcguire 8y ago

That's actually not a bad idea, as a backstop.

shoo 8y ago
I did a search for `startup "put option"` to see if there was anything written about this. There is one article arguing that major early investors should demand something vaguely similar [1] -- although it sounds like it is not designed to be triggered when a company fails and loses a lot of value, but instead perhaps when a company is partially succeeding, or succeeding but the investor wants to reduce exposure or otherwise get some cash back: > If the investor exercises the put, the investor is entitled to redeem all or a portion of his equity interests in exchange for the initial investment value plus a nominal return above the risk-free rate, yet still maintain a reduced equity position in the company–perhaps, somewhere between 50% to 75%. > To prevent the investor from exercising the put at a moment when the company’s financial stability or expansion plans could be jeopardized, the company can require that in addition to a prescribed time period restriction, certain revenue milestones must be achieved and set as “triggers” before the put may be exercised. > The put option must be structured in a way that enhances the investor’s optionality without putting the company at balance-sheet risk. It is possible to strike that balance. [1] https://www.thinkadvisor.com/2010/04/01/venture-populist-the-venture-investors-put-option/ https://www.thinkadvisor.com/2010/04/01/venture-populist-the... Another variation would be to strike a deal where put options were not written by the startup but by some other third party (an insurer or bank?), which was highly likely to remain liquid in the event that the startup went bust. This could avoid needing to constrain the use of the options with triggers & so on. On the other hand, it would be a pretty risky business for a third party to sell such things, so they probably wouldn't be cheap to buy...