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There is another less discussed downside to Vision Fund’s reckless spending and overvaluation of startups. While Travis & Adam make their billions, the employe
by WisNorCan 7y ago
There is another less discussed downside to Vision Fund’s reckless spending and overvaluation of startups.
While Travis & Adam make their billions, the employees at Uber and WeWork are granted overvalued options and stock that subsequently crashes.
The Uber stock is still below where it was 5 years ago and may never recover. The WeWork stock will likely never recover.
As an employee, I would avoid working for a company that is taking funny money from VF. Its a big warning sign to see a company raise from VF given what has come to light.
- indemnity 7y agoEvery time I see these shenanigans it validates my position of turning options into cash if I’m above water ASAP, and getting as much of my raises into base salary as possible. Twice burned (2001, 2009)...
- WisNorCan 7y agoI completely agree. I recommend selling along the way. You may lose some upside, but you definitely lose some downside. Unfortunately, WeWork employees aren’t given that choice. They are getting fired with underwater options while Adam makes billions. I wonder how he can rationalize this to himself.
- jscotto 7y agoWhy would he need to rationalize this to himself? He just made over a billion dollars.
- svaha1728 7y agoHe can, and will, continue to fail upwards.
- SauciestGNU 7y agoWith his luck he should jump in the 2020 primaries.
- ganeshkrishnan 7y agoJust like Nelson bigetti
- samsol 7y agoI can think of a Billion reasons for him to rationalize this !!!
- robk 7y agoMeh I regret selling any GOOG in the low $200s
- georgeecollins 7y agoYou shouldn’t. You need to sell some of the options of the company you work for to diversify. If you think you are smart enough to know the future of stock prices than you should trade stock for a living.
- solveit 7y agoIt was still the right move. As every poker player knows, just because you lost doesn't mean you played the hand wrong.
- askafriend 7y agoIt wasn't necessarily the right move. He/she likely had asymmetric information about where Google was going and how likely it was to continue succeeding. If they couldn't sufficiently exploit that, then that's on them (assuming they had access to all the relevant metrics). It's great to diversify, but blindly selling isn't some sort of virtue to optimize for...
- compsciphd 7y agodepend, as I wrote above. If I give you 2 options. 1) $300K in GOOG 2) $300K in cash if you dont believe that using all of the $300K in cash to buy GOOG immediately is the smart move, yes, you should be blindly diversifying.
- askafriend 7y agoI think we're largely in agreement. If you can't leverage the asymmetric information about your company to make a competent buy/hold/sell decision then yes by all means diversify it all. I just want to make sure the point about asymmetric information is clear though. And it's more relevant in private companies than public ones. If you're not willing to buy and hold private company equity even after having access to asymmetric information about the firm, then you should consider leaving the company entirely. If you don't then that defeats the entire purpose of taking a chance on a private company and being compensated in equity which can't be acquired through traditional means. You're accepting the equity presumably because you think it's worth a lot more based on the asymmetric information and market opportunity.
- wpietri 7y agoSame. I have enough financial exposure to the tech industry through my work that I don't want my investments to be correlated with that.
- hintymad 7y agoI can think of many counter examples too. Say, Netflix, Arista Networks, Google, Facebooks, and etc. I guess the key is to pick a good company instead of avoiding options. And of course, leave a company immediately if it shows fundamentally bad signs.
- xiphias2 7y agoThe key at this point is to pick a good public company (except Beyond Meat that is highly overvalued compared to half year ago). In that case it doesn't matter that much if you're getting options or cash. I don't see any reason for working for overvalued options at a not-early-stage private company. Also I view being an early stage employee too risky to worth it.
- mavelikara 7y agoI have asked this here before, but did not get a good answer. When a startup takes money from an investor with significant preferences and ratchets, why is the 409a valuation for common stock the same as those the investors got? At the startup I worked, during the initial rounds the common and investor class were priced significantly differently. But in later rounds they converged almost to the same price. What is the rationale for doing this?
- WisNorCan 7y agoThe 409a valuation isn’t typically the same as the investor price early on. This accounts for lack of liquidity and preference. However, as those differences start disappearing, e.g. when WeWork and Uber were about to IPO, the 409a converges with the investor price.
- mavelikara 7y agoBut why? By the price of common and investor class of shares converging, the implication is that the economic value of the preferences and other arrangements investors get is $0. That does not sound right to me.