5 ms·

Luring employees with promises of equity and then not delivering sounds like a bait and switch.

bilbo0s 7y ago
I 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 ago
  Whenever 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 ago
    But 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.
    - scarmig 7y ago
      > It was entirely predictable that they would get none of the lottery tickets No shit. You've been in this space well over a decade. If someone offered this comp package to you, you'd likely anticipate exactly how it'd play out. (Maybe... looks like the investors got scammed this time too, so perhaps it was a practice that people typically respected.) I guarantee that, when employees accepted their comp package, they weren't doing it with the understanding that they would never see a cent of equity if the Toptal succeeded well beyond anyone's expectations. So, yes, it was a devious move on the CEO's part, but at some point deviousness becomes sociopathic. Ripping off your workers is one of them.
  - staticautomatic 7y ago
    But that's not what happened here. It's not that they were told one thing but should have known to expect another. They were told one thing, and that one thing happened/didn't happen. It's totally cut and dried.
    - scarmig 7y ago
      Employees aren't sophisticated investors, particularly new grads entering the workforce. If it was clearly monopoly money that was never going to be going into their pockets, why did the CEO bother to offer it to them? The obvious and accurate answer is he knew they would value it at sticker price (or, at least sticker price discounted by the usual startup lottery shenanigans) while it would never cost his company a cent. The fact that he managed to con a bunch of people using what amounted to insider knowledge is likely legal, but we still call a legal con a con.
      - staticautomatic 7y ago
        The fact that it might never happen doesn't make it monopoly money. I once had a company that issued a convertible note which basically said, "If we raise x amount of money then it triggers a conversion to preferred." We didn't raise x amount of money, so it didn't convert to preferred. Pretty simple stuff.
    - JamesBarney 7y ago
      I think most of the employees were under the impression that if the company did as well as it did they would make a significant amount of money. The CEO tried to encourage this view and did nothing to discourage it.
staticautomatic 7y ago
But they weren't lured with the promise of equity. The promise was that they'd get equity if there was a subsequent funding round. The investors, especially, have zero right to complain.
- elsewhen 7y ago
  FTA: “I was told the conversion [of Toptal into a corporation] would happen in a number of months,” said Aaron Diek, who is based in central Texas and says he worked for Toptal in 2014 and 2015, when Toptal said it was generating $80 million in revenue per year. “I asked on a number of occasions, and the answer [from Du Val] was always ‘it’s coming, it’s coming.’
  - staticautomatic 7y ago
    Maybe that employee has a case for relying on that statement to his detriment if it was a misrepresentation or an outright lie. On the other hand, it's possible that Du Val had a good faith belief that the conversion was going to occur. Who knows? We'll probably never find out unless there's a lawsuit.
  - ilikehurdles 7y ago
    This seems to be par for the course for any startup that drinks its own Kool-aid. I've been told many times at every organization I've been at by enthusiastic co-workers believing the exit is right around the corner. It never was and all of those previous orgs have either gone bankrupt or had really unfavorable acqui-hires. I believe in enjoying my work environment, being paid fairly, and doing work that positively impacts society. Beyond that, I treat every share of equity as toilet paper in the negotiation stage -- when it comes to a private company organized as a startup/VC-leech.
    - ThalesX 7y ago
      I also use this approach and I love how little leverage equity brings them to the negotiation table. You want to give me equity, nice, but I'm still working for my preferred salary under my preferred conditions.
deleted 7y ago
[deleted]
a13n 7y ago
It sounds like fraud.
oh_sigh 7y ago
Conditional promises of equity, where the conditions were never met.
chucksmash 7y ago
Definitely a bait and switch, even if legally it is all above table and the employers should have relied on what the paper said not what people said. Having that contingency about taking more funding might not create any legal obligations but there is certainly an implication there. If I cover your tab and you say you'll pay me back next time we go out, "I'm never paying you back" is an equivalent statement if there's an unspoken "but we're never going out again" at the end of the first statement, but it wouldn't be my first interpretation. --- That said, if an Engineering Director is getting 0.02% then, assuming TopTal is worth $1b, you'd have a Director cashing out at <$200k pre-tax right? I'd imagine run of the mill ICs had a percentage such that they didn't accept it thinking "and when this pays off I'm done forever"

I 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 ago
Whenever 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 ago
  But 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.
  - scarmig 7y ago
    > It was entirely predictable that they would get none of the lottery tickets No shit. You've been in this space well over a decade. If someone offered this comp package to you, you'd likely anticipate exactly how it'd play out. (Maybe... looks like the investors got scammed this time too, so perhaps it was a practice that people typically respected.) I guarantee that, when employees accepted their comp package, they weren't doing it with the understanding that they would never see a cent of equity if the Toptal succeeded well beyond anyone's expectations. So, yes, it was a devious move on the CEO's part, but at some point deviousness becomes sociopathic. Ripping off your workers is one of them.
- staticautomatic 7y ago
  But that's not what happened here. It's not that they were told one thing but should have known to expect another. They were told one thing, and that one thing happened/didn't happen. It's totally cut and dried.
  - scarmig 7y ago
    Employees aren't sophisticated investors, particularly new grads entering the workforce. If it was clearly monopoly money that was never going to be going into their pockets, why did the CEO bother to offer it to them? The obvious and accurate answer is he knew they would value it at sticker price (or, at least sticker price discounted by the usual startup lottery shenanigans) while it would never cost his company a cent. The fact that he managed to con a bunch of people using what amounted to insider knowledge is likely legal, but we still call a legal con a con.
    - staticautomatic 7y ago
      The fact that it might never happen doesn't make it monopoly money. I once had a company that issued a convertible note which basically said, "If we raise x amount of money then it triggers a conversion to preferred." We didn't raise x amount of money, so it didn't convert to preferred. Pretty simple stuff.
  - JamesBarney 7y ago
    I think most of the employees were under the impression that if the company did as well as it did they would make a significant amount of money. The CEO tried to encourage this view and did nothing to discourage it.

staticautomatic 7y ago

But they weren't lured with the promise of equity. The promise was that they'd get equity if there was a subsequent funding round. The investors, especially, have zero right to complain.

elsewhen 7y ago
FTA: “I was told the conversion [of Toptal into a corporation] would happen in a number of months,” said Aaron Diek, who is based in central Texas and says he worked for Toptal in 2014 and 2015, when Toptal said it was generating $80 million in revenue per year. “I asked on a number of occasions, and the answer [from Du Val] was always ‘it’s coming, it’s coming.’
- staticautomatic 7y ago
  Maybe that employee has a case for relying on that statement to his detriment if it was a misrepresentation or an outright lie. On the other hand, it's possible that Du Val had a good faith belief that the conversion was going to occur. Who knows? We'll probably never find out unless there's a lawsuit.
- ilikehurdles 7y ago
  This seems to be par for the course for any startup that drinks its own Kool-aid. I've been told many times at every organization I've been at by enthusiastic co-workers believing the exit is right around the corner. It never was and all of those previous orgs have either gone bankrupt or had really unfavorable acqui-hires. I believe in enjoying my work environment, being paid fairly, and doing work that positively impacts society. Beyond that, I treat every share of equity as toilet paper in the negotiation stage -- when it comes to a private company organized as a startup/VC-leech.
  - ThalesX 7y ago
    I also use this approach and I love how little leverage equity brings them to the negotiation table. You want to give me equity, nice, but I'm still working for my preferred salary under my preferred conditions.

deleted 7y ago

[deleted]

a13n 7y ago

It sounds like fraud.

oh_sigh 7y ago

Conditional promises of equity, where the conditions were never met.

chucksmash 7y ago

Definitely a bait and switch, even if legally it is all above table and the employers should have relied on what the paper said not what people said. Having that contingency about taking more funding might not create any legal obligations but there is certainly an implication there. If I cover your tab and you say you'll pay me back next time we go out, "I'm never paying you back" is an equivalent statement if there's an unspoken "but we're never going out again" at the end of the first statement, but it wouldn't be my first interpretation. --- That said, if an Engineering Director is getting 0.02% then, assuming TopTal is worth $1b, you'd have a Director cashing out at <$200k pre-tax right? I'd imagine run of the mill ICs had a percentage such that they didn't accept it thinking "and when this pays off I'm done forever"