4 ms·

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 lotte

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.

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.