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At Booming Toptal, No Stock for Employees or Investors
- hmahncke 7y agoHow is "all of Toptal’s stock [is] in the hands of one person" when Toptal "attracted funding from well-known investors including Andreessen Horowitz." Doesn't funding from a16z typically end up with a16z owning stock? [unfortunately can't read the whole article behind the paywall]
- tvladeck 7y agoMy guess (and this is just a guess, as I too can't read the article), is that the investment was a convertible note, and they actually paid back the debt instead of allowing it to convert into equity. But I am no expert and I don't know the facts — I was just wondering the same thing and this was the scenario I landed on as a plausible hypothesis.
- pflugerc 7y agoSame guess. The investors either 1) got there principal back with no interest or 2) they still have there money in and it only get a value upon raising money or a sale. Likely it’s #1. Investors didn’t get screwed. They just didn’t win.
- bwoj 7y agoThe funding was in convertible notes which convert to equity in the next funding round. Presumably these agreements don't have any provisions for other exits.
- robocat 7y agoIn which case the investors have not been screwed because they are sophisticated enough to know the possible outcomes - that's just business. I suspect the VC team would say "well played that man".
- Tehchops 7y agoDo you really want to burn a bridge with a16z/AH in the tech industry? They may say "well played" in so many words, in public. Privately? They may be marshaling their bottomless war chest to unmake you.
- robocat 7y agoHe openly states he has no trouble with interest from investors: https://www.toptal.com/investors https://www.toptal.com/investors And I can't see why his existing investors wouldn't be interested - although they would perhaps take more care with the terms. His ethics don't seem to be weird, compared against stories about some other founders. I can't see why you make predictions about how he should act or how VCs would act (what's your expertise?)
- threezero 7y agoThat first link about investor interest is entirely his word, which is worthless according to his former employees.
- Tehchops 7y agoIf read/listen to MA or BH at any length, they heavily emphasize the value of relationships and a network. This behavior seems absolutely anathema to their stated ideals.
- s3nnyy 7y agopaywall
- deleted 7y ago[deleted]
- bdcravens 7y agoMeta: this site seems to be paywalled from the first article. How does this get upvoted to the front page? Is this some great site that I'm missing out on that people are subscribed to, or are people just smashing the upvote without reading the article?
- rahuldottech 7y agoI recall seeing a comment of dang's wherein he mentions that this site regularly disabled paywalls for visitor coming from HN.
- bdcravens 7y agohttps://news.ycombinator.com/item?id=20708064 https://news.ycombinator.com/item?id=20708064 is the unpaywalled version.
- floatingatoll 7y agoIf you email the mods about this comment at the Contact link in the HN footer they'll fix the link and the dupes, often in <5min during business hours. Posting about may eventually work but I see you posting this in multiple threads here, so FYI.
- dsego 7y agoI still get a paywall.
- bdcravens 7y agoOdd - it worked at first for me, but I guess they cut it off pretty quickly.
- tedmiston 7y agoThe Information's content is top notch but access is $400+ per year [1]. The quality of the stories they write is great but the number is very small and most stories are niche. They also break stories before the mainstream tech press. I get the feeling most of their customers justify it as a business expense vs a personal one. All of the quotes in their subscription signup flow are from well known founders or execs that subscribe (unclear if they get it for free for the endorsement). [1]: https://www.theinformation.com/subscribe/one https://www.theinformation.com/subscribe/one
- huac 7y agohttps://www.theinformation.com/go/4146dbb37f https://www.theinformation.com/go/4146dbb37f bypasses paywall
- bdcravens 7y agoAlready submitted to HN, which seems a better place for discussion: https://news.ycombinator.com/item?id=20708064 https://news.ycombinator.com/item?id=20708064
- tvladeck 7y agoFWIW I still hit the paywall when I click on that link (and the other one referenced as bypassing the paywall)
- tlb 7y agoURL changed to that (from https://www.theinformation.com/articles/at-booming-toptal-no-stock-for-employees-or-investors https://www.theinformation.com/articles/at-booming-toptal-no...)
- whoisjuan 7y agoNone of these links are bypassing the paywall unfortunately.
- bnt 7y agoI think the article misses the point: are we now in an era where you actually expect to get stock when you join a company? As a former Toptal employee: IMHO the co-founder in question was widely regarded as a horrible manager, often pushing people to burnout and generally imposing a culture of secrecy and mistrust. The VPs they ousted were nothing better. I personally went through several burnouts while there, but also that was a springboard to a much better career afterwards. Yes, we've put in 9/9/6 for years in the founding years, but we were also compensated quite generously.
- marcinzm 7y ago>I think the article misses the point: are we now in an era where you actually expect to get stock when you join a company? If you join with the expectation of stock or are sold on stock as part of your package then yes. Based on the article, people were offered stock contingent on another funding round. That round never happened. If they were sold on promises of getting that stock and a round happening then they're right to be pissed. This has, as I read it, nothing to do with a company that just decides to not give out promises of stock in any form.
- derefr 7y ago> If they were sold on promises of getting that stock and a round happening then they're right to be pissed. Does a statement of the form "you'll get X if condition Y" imply "we will seek condition Y so that you can get your X"? I don't think that it does. For example: companies offer dividends if they make a profit. But that doesn't imply that the company will seek to make a profit in order to confer dividends. It's nice when they do, but there's no implied promise of working toward profitability just so that the dividend condition will apply.
- marcinzm 7y agoThat depends on what exactly the company said to candidates and how upfront they were about the terms. In my experience companies do far more selling than just sending out an offer. Furthermore, the offer in my experience doesn't include the paperwork for equity unless you request to review it.
- rahuldottech 7y agoI am a teenager, and know nothing of starting or running a company. That said, from what I have read, is it not true that investors who hold equity constantly apply pressure to maximise profits, often leading to companies doing... unethical things? Whenever I've complained about a company being unethical or user-unfriendly, a friend of mine who lives in the US and knows more about this stuff always points out that because of pressure from investors, companies are often forced into such practices, and theorises that any company that takes outside investment in exchange for equity is always going to end up this way.
- SpicyLemonZest 7y agoSome people certainly do unethical things to keep their investors happy. That's not really a problem unique to investors, though; other companies do unethical things to keep customers happy or keep their employees happy.
- emilsedgh 7y agoIt really depends on the company culture, sector, etc. There's a lot of dynamics in here. Public companies are generally more prone to this issue, as all the ethics become abstract to shareholders. They are not involved in the dirty work. A lot of times, companies do the right thing not because of morality, but because doing the wrong thing has a risk (from a PR disaster to a regulatory issue). If the culture of the company is willing, the whole concept of morality is reduced to a risk/benefit formula. And they start to learn how to reduce risk, and it's a downhill from there.
- rahuldottech 7y ago> A lot of times, companies do the right thing not because of morality, but because doing the wrong thing has a risk (from a PR disaster to a regulatory issue). I think we've all seen that at this point in time public outcry and PR disasters matter very little in the larger scope of things for such companies (Equifax, Google, Facebook, et al.)
- 7y ago
- tschwimmer 7y agoA lot of Sillicon Valley startup fundraising ends up resembling an iterated prisoner's dilemma. Most startups fail and it's likely that you might have to work with people a few times before you get it right. The [generally] dominant strategy for Iterated Prisoner's dilemma is tit for tat[0], and consequently you see a lot of people cooperating when when it might be more lucrative to defect is because they know that they might want to work together again. Basically, neither side wants to burn the bridge. This guy seems to have reasoned that for him, it was more optimal to defect, and it seems to have worked out. TopTal succeeded and he didn't raise any more money. His reputation with VCs is torched, but he doesn't need to raise any more money. If TopTal had failed, it really wouldn't have mattered because he wouldn't have needed to raise any more either. You have to wonder if VC will eventually become a market for lemons[1] as founders who know they have a big opportunity only offer investors unfavorable terms. Obviously no startup is a 'sure thing' but it does seem like founders increasingly have a lot more information than their investors. [0]https://en.wikipedia.org/wiki/Tit_for_tat https://en.wikipedia.org/wiki/Tit_for_tat [1] https://en.wikipedia.org/wiki/The_Market_for_Lemons https://en.wikipedia.org/wiki/The_Market_for_Lemons
- StriverGuy 7y agoCertain business models require high amounts of capital in order to create leverage/growth. Think of Uber, WeWork etc. All the founders made out fabulously rich due to the ability to leverage growth on the back of VC money. Organically growing, profitable business may never need to take outside money. It really comes down to the market and growth strategy.
- goatinaboat 7y agoCertain business models require high amounts of capital in order to create leverage/growth. Think of Uber, WeWork etc The business model of selling $1 for 50c and hoping that later you’ll be able to sell it for $2 because... reasons.
- jfim 7y agoThat model works if there are economies of scale. Say that your one dollar cost at one million users is $0.80 fixed costs and $0.20 incremental cost. Adding more users will eventually make the model profitable, and this is how Facebook works, for example.
- WheelsAtLarge 7y agoI'm I missing something? It seems to me that everyone involved knew what they where getting into specially the investors. You hear about the cases where founders get screwed all the time. This is a case where a founder gets to keep his company. Good for him. I for one think it's a bit greedy after all he did not build the company all by himself but silicon valley investment is all about greed. It's just another day.
- elsewhen 7y agoLuring employees with promises of equity and then not delivering sounds like a bait and switch.
- bilbo0s 7y agoI don't know man? Just Devil's Advocate here, but as an employee going into a startup it's kind of well known at this point that you're only likely to get what's written in black and white. Would you go to work for a company that promises to start paying you at "sometime in the future"? I kind of agree with WheelsAtLarge, you had to have known what you were getting into. Personally, I wouldn't work for someone for free for any length of time unless it's volunteering. Anything else just sounds fishy. Similarly, if someone promises you equity "later if [blah blah blah]"? I'm just saying, that sounds pretty fishy.
- scarmig 7y agoWhenever I talk to new grads, I tell them to value their equity compensation at zero for a small startup, for exactly that reason. But, it's similar to a lottery: you should expect to lose, but an organization can't run a lottery and pocket the winnings itself under the pretext everyone should have known they were throwing away their money.
- bilbo0s 7y agoBut in this case the organization is pocketing the money because everyone joined the organization without being given any lottery tix at all. That's the issue. The boss told them that they would get lottery tickets later, but only if a hypothetical third person showed up and gave the boss even more lottery tickets. My point is not that the hypothetical third person never showed up, which in and of itself meant that the employees wouldn't get lottery tickets. My point is that the employees should never have joined the company in the first place on the basis of such a ridiculous promise. It was entirely predictable that they would get none of the lottery tickets. No one is going to pay more than they have to, nor will they pay up after they have what they want out of you. Just ask any prostitute.
- larrik 7y agoHow does he avoid it being a Sole Proprietorship and being on the hook personally for any lawsuits against it?
- nostrademons 7y agoYou can have a one-person corporation where the founder is the sole shareholder, officer, and employee and still be protected from legal liability. A very large proportion of LLCs are in exactly this category, as well as a decent number of S- and C-corps. You just have to file the appropriate articles of incorporation, continue paying your taxes, and make sure that company business is done in the company name out of the company bank accounts while personal business is done in your name out of your personal bank account.
- henryfjordan 7y agoDon't forget throwing yourself a little "shareholders meeting" every year!
- nostrademons 7y agoYup, and re-electing yourself president of the board of directors.
- koolba 7y agoIts common to do that right before the company funded annual holiday party.
- Igelau 7y agoWhere you get recklessly drunk and wake up next to the CEO's spouse!
- 1123581321 7y agoIt’s still a separate legal entity. Sole proprietorship means there is no corporation, just a person doing business with their own assets and getting paid directly.
- coupdejarnac 7y agoIs there anything about Toptal that isn't scummy?
- jameslk 7y agoWould love to know what you find scummy about them. I've been a freelancer in their network since 2014 and haven't found anything more egregious than any other agency from my dealings with them.
- sidlls 7y agoI briefly freelanced with them in 2014/2015 and I found it to be no better than E-lance or the like. They definitely didn't (at that time) do have any better clients, and they constantly pressured me to lower my rate (which I considered already to be low).
- jameslk 7y agoI've had a few projects from them, one very large with a Bay Area client spanning a year. In the early days they would suggest a lower rate but now they change it to whatever I ask. I'm not sure what your rate is, but mine is competitive with Bay Area agency rates. Definitely better than Upwork (Elance) since I wouldn't be able to find the type of enterprisey clients I find on Toptal.
- kirubakaran 7y agoI'm curious what their percentage cut is.
- jameslk 7y agoDepends but it's been between 30-50%. They add that on top of the rate I request.
- kirubakaran 7y ago
- DevKoala 7y agoThe company I work for is in the same situation, but no complaints from me since I understood early that I need to ask for high salary raises along with the option rewards, and not let the execs convince me to just take more options. There have been talks of an IPO or acquisition for years, and hopefully, it happens, but they feel a bit like a carrot on a stick; the revenue goal for going IPO is always increasing.
- rolltiide 7y agoHe kept all his equity, we should be congratulating him for his acumen and prowess in negotiating this so smoothly. Why are we glorifying giving a fraction of a fraction of a percent to employees who are going to be further diluted or totally zeroed out in any exit? Why are we treating equity in other people’s hands as validation? Offering convertible debt that converts into services or something else is a way of financing. You don't need to aspire for a bunch of crunchbase entries. There was a time when I thought different like “oh thats not a real seed round if the investors didnt do a share investment, or thats not a real series A” but now I know differently and primarily take a dim view on preferred shares, liquidity preferences and expensive capital - when acting as a founder or employee. Many ideas are more profitable exits for founders if there were no liquidity preferences.
- baron816 7y agoI don’t feel that bad for the investors, or really even the employees. A lot of startup equity is worthless anyway. But screwing over your cofounder and COO—your partner who’s been on the frontlines with you effectively running the company for eight years—that’s incredibly scummy. That’s a real psychopath move. How can someone be so greedy?
- plorkyeran 7y agoThe company is currently suing the no-equity cofounder COO for fraud. Perhaps the lawsuit is entirely baseless and this is just another part of the CEO fucking his cofounder over, or perhaps there's actually a good reason for the cofounder to not get any equity. We really don't have the ability to judge based on the information we have, and calling the CEO a psychopath is a bit much.
- neilv 7y ago> I don’t feel that bad for the investors, or really even the employees. [...] But screwing over your cofounder and COO—your partner who’s been on the frontlines with you effectively running the company for eight years—that’s incredibly scummy. Are you identifying only as a co-founder, and you don't think that startup employees deserve to also benefit from success, such as they would by having equity in the company? I think the idea -- of startup success being all about the founders, and employees are just commodities -- is not unusual, but I don't understand why. Don't startups hire developers, for example, who have key insights, make technical decisions, and often put in above&beyond effort -- which has substantial effect on the startup's success?
- skinnymuch 7y agoLike Snapchat, Twitter amongst many other companies co-founders have done? Or bands like the Beatles?
- jonthepirate 7y agoI was Taso's roommate on Ramona st in Palo Alto for 6 months back when he started his company with his founder who was familiar with running a consulting company. It's really the ultimate arbitrage - take a cut of a kagillion foreigner's hourly pay to enrich yourself. Good for him. One day he sort of disappeared and I never heard from him again. Glad to see he's doing well.
- dang 7y agoThis was posted yesterday, but the article was hard-paywalled. We asked The Information if they would unlock it for HN readers, as they have been doing recently (e.g. https://news.ycombinator.com/item?id=20630974 https://news.ycombinator.com/item?id=20630974, https://news.ycombinator.com/item?id=20423483 https://news.ycombinator.com/item?id=20423483). They agreed, so now that HN readers can actually read the article, we rolled the clock back on this discussion. Edit: sorry, I pasted in the wrong link so it didn't work right away. It should work now, meaning everyone who clicks on the title above should get to read the article.
- lbatx 7y agoWell, if you want any further insight into the CEO, check out Toptal's investment page: https://www.toptal.com/investors https://www.toptal.com/investors. He minces no words and comes off quite aggressively. Very much a "my way or the highway" tone to that page. They seem sort of like StackOverflow or Basecamp from a bootstrap perspective, without the warm fuzzy feeling you get from interacting with either of those companies.
- spitfire 7y agoThe guy may be a class A Ahole, but I really like that message. Like, really like it. He's essentially saying "yes, I know the shenanigans you play, and I'm not going there." Though, I doubt it's a business that will "scale to tens of thousands of employees around the world". That seems like a reach.
- jiveturkey 7y agoThe content is fine. It's obviously spurred by experience or by an influx of offers. The presentation is shite. Just have an autoresponder. It reeks of Netflix' culture deck.
- chao- 7y agoThe term "reek" is normally negative in connotation. I have seen (at least on HN) the famous Netflix culture documents praised as straightforward method to assist in defining culture. Not that it "solves" culture in some magical, systemic way (i.e. naive founders saying "Look we have a culture deck, culture done!"), but still have only heard it referenced as a useful communication tool. So having never seen it spoken of poorly, I am interested in your perspective.
- jiveturkey 7y agoYes, I did mean to invoke the negative connotation of "reek". The netflix culture deck isn't a bad ideal, not at all. It may not suit some, but that's ok. I think it has some real problems but I won't go into that here. Anyway, let's not let perfect get in the way of good. If it were the reality, it would be better than the way most companies operate, by a long shot. But just like with Valve, the theory is different than the practice. So just as we (HN) hate the person with the fancy car, fancy watch, designer clothes, who are "obviously" just doing this to signal virtue, I loathe the type of org that engineers by blog and cultures by pushy slide deck. It's fine to desire that culture (even if it's impossible), but you look like a buffoon by insisting on being so pushy about it. And that's what Toptal is doing. I am not a netflix employee, but I know a few former and one current employee.
- m0zg 7y ago"No stock for employees" in a startup actually sounds great to me. The approximate value of that part of the package is about zero, but few people realize that, and a lot of employees get taken advantage of when startups offer lower pay in exchange for minuscule (and dwindling through dilution) equity. Receiving competitive amounts of hard cash would be better for 99.9% of the people.
- seattle_spring 7y agoIs there any evidence that Toptal offered a competitive salary in relation to total compensation packages elsewhere? A good senior engineer can get $300k+ at FB or Google. Most startups would offer $160-$200k plus equity. If Toptal "wasn't playing that game," then surely they were offering $300k salaries?
- m0zg 7y agoI'm not saying it did. I'm saying that, unlike a typical startup employee, Toptal employees knew exactly what they were getting into, no cap tables, dilutions, liquidation preferences, or other bullshit. That seems fair to me.
- neilv 7y agoRelated discussion yesterday, including thread on a theinformation.com article: 114 points by ivanech 1 day ago "Toptal sues co-founder Breanden Beneschott for fraud (pacermonitor.com)": https://news.ycombinator.com/item?id=20708596 https://news.ycombinator.com/item?id=20708596
- throw03172019 7y agoHow do the investors not have stock? Convertible note which never converted?
- nopzor 7y agoyes exactly.
- 0x8BADF00D 7y agoNot really a big deal tbh. Instead of stock ask for as high of a salary as possible.
- oh_sigh 7y agoHow exactly did Breanden Beneschott end up with zero shares? Was he just not paying attention or what?
- aylmao 7y agoIs striking not an option for Toptal's employees? I imagine, especially at the size the company is operating, it'd probably be a very effective way for employees to make their voice heard and have negotiating leverage. Plus, this seems to apply to all employees. Not even the co-founder had shares— this guy seems to be alone at the top.
- Igelau 7y agoProbably not. It sounds like they're scattered all over the place, with only heavily monitored company channels to contact one another (e.g. the Slack channel that shames people for spelling and grammar mistakes). There's no water cooler.
- deleted 7y ago[deleted]
- hn_throwaway_99 7y agoMan, this guy is a sociopath. For everyone (including the CEO) saying "but they all knew what they were getting into", consider why would the CEO even bother putting those terms in there (e.g. the equity on conversion to a corporation - which according to comments in this thread he specifically told employees he would do -, the convertible note terms, etc.) unless it was specifically to deceive the investors and employees. If that's the way he treats folks who are supposed to be on the same side, I'd hate to see how he treats his enemies.
- deleted 7y ago[deleted]
- harrisonjackson 7y ago100% the investors are sophisticated + informed enough to understand the risks of convertible notes. There are similar risks for a founder when accepting convertible notes. I'd guess the investors could all call the debt in at this point (like one already did) but they have no incentive to do so since they'd rather hold out for a conversion event which could still happen. The risk to a founder is having the debt called and not being able to pay it back and/or having the valuation of the company not where you'd predicted - depending on the terms a founder could actually lose their company in this case. NAL. Really it just seems _too bad_ for the employees and cofounder that feel like they're getting screwed. It isn't like "get it in writing" is a new concept though. I'd guess they either drank the Koolaid early on or they had a gut feeling they were getting screwed for years before this all came out. Either way, a shitty place to be in but not new or uncommon with cut-throat founder/investor types. They should go found companies themselves! Get a big ol' piece of the pie!
- paggle 7y agoI can’t feel bad for the employees. They signed knowing they weren’t getting any stock. What’s wrong with Netflix style all-cash compensation?
- seattle_spring 7y agoNetflix offers $400k - $600k salaries to engineers to be competitive with total compensation packages of companies that offer part salary and part stock. Is there evidence that Toptal offered similar salaries? I wouldn't at all be surprised if they were closer to the $150k range, which is not competitive.
- paggle 7y agoIf it’s not competitive then don’t take the job. An engineer should be able to evaluate the difference between Toptal and the other offers they have, with the caveat that stock is hard to predict (the Silicon Valley mantra that “equity is worthless” might lead one to choose Toptal at $150K over another startup with $140K + stock). I highly doubt that anyone with a Netflix offer chose Toptal instead, if they did it was a blunder.
- Rainymood 7y agoIt's a dick move, but surprisingly legal. If A then B, so ... if not A then not B. He will make bank with this company but I wonder if people still want to work with him in the future, I guess so but who am I to judge?
- raizinho 7y agoThe logical equivalent of if A then B is its contrapositive, if not B then not A, not its inverse, if not A then not B.
- nosmokearea 7y agoI would recommend to the staff to sabotage the company. Just steal the entire freelancer database, then upload it to many anonymous websites and this will crush the company. Yes, this is unethical, but so is the founder. This evil guy have to pay for everything he did.
- xivzgrev 7y agoRationally, Sounds like he played the game and won. He didn’t make any false promises (but I’m sure didn’t correct anyone either). Values wise, to me sounds like a bit of a dick, esp with the early employees. Good for him, he made a billion dollars. But he knowingly took advantage of people who chose to invest years of their life with him. Not cool. He doesn’t have to keep being a dick either - just give employees a generous bonus (like 1x annual salary) when they reach x years if they did well and a thank you, not that hard. That’s all people want.
- JamesBarney 7y agoI bet he made a lot of false promises just not in writing. I he was trying to mislead people the whole time. And specifically tried to compensate investors and employees in ways that he intended to never pay them in a way they thought they would be compensated.
- jjeaff 7y agoThere isn't much difference between directly lying to someone and knowingly leading them on while allowing them to have false ideas of the facts. Both from a moral and legal perspective.
- hollaur 7y agoRegardless, absolutely terrible experience here myself.
- CalChris 7y agoEven if this guy turns benevolent tomorrow morning and issues his options, they're screwed tax-wise. I can't think of anything I like about this, from the utter selfishness of the founder to a16z funding such a company with such bad terms for the employees. I'd like to know who the VC was and read an explanation from him. I'm reminded of Steve Blank's article Startup Stock Options – Why A Good Deal Has Gone Bad https://steveblank.com/2019/04/10/startup-stock-options-why-a-good-deal-has-gone-bad/ https://steveblank.com/2019/04/10/startup-stock-options-why-... Discussion of said same: https://news.ycombinator.com/item?id=19624164 https://news.ycombinator.com/item?id=19624164