6 ms·

A bunch of early engineers i knew made less than 100k when their company got acquired for $320m cash. Down rounds and preferential stocks are not fun

danrocks 5y ago
I made $10k on a $138m sale and $50k on a $125m sale. I am that early Engineer you speak of.
- leetrout 5y ago
  Did you know the cap tables at those companies?
  - danrocks 5y ago
    I don't think anybody knew the cap table for those companies. To be more precise: one of them didn't even have a cap table, the other was a secret between the lead investor and the original owner (an incubator). Needless to say nothing was disclosed to engineers, or any one of them for that matter. Even in this state, both companies raised a shitton of money.
    - leetrout 5y ago
      This is what had been surprising to me in my experiences... first few startups the cap table was shared info but no specifics (investor pool 33%, employee pool 7%, etc) so at least you knew the rough outlay. Then one recent startup was championing transparent salaries but wouldnt share anything about the cap table which seemed odd to me. My current company the CEO answers questions about the stock outlay but not specifics but also doesnt claim to be transparent. I just assumed from my earliest experiences most small companies were happy to explain the cap table and walk folks through dilution events.
      - bingohbangoh 5y ago
        Cap tables can change very quickly too. Even if you know at the beginning, you’re not privy to any changes later on.
        leetrout 5y ago
        Sure. More the reason to have a rough representation that is public in a transparent company. Cant make good decisions without full information.
    - sokoloff 5y ago
      > To be more precise: one of them didn't even have a cap table A cap table is a representation of ownership. Saying a company doesn’t have one is like saying I don’t have a height.
      - danrocks 5y ago
        So you’re infinitely short? Joking. What I meant is that the cap table was not disclosed and changed so often that nobody really knew what it was at a given moment in time.
- bingohbangoh 5y ago
  Were you given a signing bonus to stay on after the acquisition?
- binbag 5y ago
  But was this a surprise to you? Did you expect to make more money from the sale of the company, and if so, why?
  - aerosmile 5y ago
    Because most of the shiny things in SF were paid for with equity. And there are plenty of shiny things in SF. I am not saying you should work for equity, but I think you should realize why the real estate is as expensive in SF as it is. There are plenty of times when people got screwed over, and there are also - fewer, but enough to move the market - people who didn't. So when you ask the question "how could you have been so incredibly stupid to believe that equity is not worth $0," you just have to look around yourself and ask "how come that zillow lists so many properties for over $10m?" You shouldn't count on your equity returning anything, but you also shouldn't listen to people who take an overly unhealthy view at the potential upside.
    - potatolicious 5y ago
      I’m willing to bet good money that the real estate in the SFBA is driven much more heavily by FAANG stock than startup stock… Startups mint multi-millionaires. FAANG does it at scale day in and day out.
      - aerosmile 5y ago
        Even at FAANG, not enough people have the seniority for their base salary to turn them into buyers of $10m homes. I appreciate your point that RSUs are different from options, but I still think it's indicative that cash rarely comprises the majority of the wealthy people's income.
        potatolicious 5y ago
        Oh, fully agreed that cash rarely comprises the majority of wealthy people's income - but my point is that most of the tech wealthy in the SFBA comes from FAANG equity wealth, not startup equity wealth. Startups exits sometimes make a handful of people mega-rich, but as this thread has revealed, making ordinary employees rich is quite rare. Not so rare are the people who hang out at FAANGs, collecting large amounts of equity, and riding the industry up. And yeah, the wealth in this case is typically not of the level to buy $10M homes, but $2M homes? Once in a while you have a founder who strikes it rich, but that effect is overwhelmed by the more numerous folks just riding $GOOG, $AAPL, $FB, etc. to multi/deci-millionaire status.
- kabdib 5y ago
  I lost $8K on a $40M sale. Lost another $10K when a company "extinguished" prior shares (they are now worth $7B). This is basically legalized gambling with a house that's allowed to have a rigged table. If you want to do well, become a senior engineer at a FAANG.
hijinks 5y ago
i know an early engineer who worked for a well known founder 10 or so years ago. The company was sold to a large tech company for like 350mil but what happened first is the VCs/founders created a new company and sold the IP from old company to new company and sold the new company for the 350mil leaving the employees with a worthless company. So also trusting the founders and the VCs they choose are in my opinion more important then any equity grant offer
- lelandfe 5y ago
  Jesus, name and shame. That kind of behavior should follow those founders like a sign hanging from their neck saying "don't work for me."
- treeman79 5y ago
  That would be a fairly straightforward lawsuit as a company cannot intentionally defraud its own shareholders.
  - namdnay 5y ago
    If the employees had options they weren’t shareholders (yet)
    - aerosmile 5y ago
      That's a straw man argument. If you had an interest of any kind in a company, and someone screwed you, you can sue. In today's environment, companies will settle even if they have a good case, let alone if they are likely to lose. Plenty of lawyers will take such a case and get paid in a contingent fee arrangement.
- piinecone 5y ago
  Hey, my old cofounder just did this to me!
- deleted 5y ago
  [deleted]
almost_usual 5y ago
Made 15k on a 100m+ sale, was at the startup for years. I’ll stick to RSUs. Saying you helped exit a company seems to go over well in interviews though.
- danrocks 5y ago
  I have learned my lesson. Been at large company with fat RSUs for 5 years now.
- anonymousDan 5y ago
  Why is an RSU better than other types of shares, and how does it avoid this kind of dilution/backstabbing by founders? Honest question!
  - potatolicious 5y ago
    I take RSU to mean “RSUs in a publicly traded company” - i.e., the value of the shares is well known and the sort of “sell the IP and fuck the employees” shenanigans is much harder to pull off. You can get RSUs in private startups which doesn’t mitigate the risks being discussed here. That said there are still benefits to having RSUs over options (i.e., 90 day exercise window).
    - 6gvONxR4sf7o 5y ago
      I also take it to mean RSUs in a public company. I wouldn’t want RSUs in a private startup because I couldn’t sell them, but I’d still take the tax hit as they vest.
      - travem 5y ago
        The availability of double trigger RSUs help mitigate that
  - sethammons 5y ago
    RSUs are actual stock that can be sold on the market. Options are the ability to buy a share in the future at a given price. One is real money now and the other is maybe money later.
mbesto 5y ago
Which is why it would be entirely reasonable for someone who is granted stock as part of compensation to do a full diligence on the company before accepting the terms. Companies deliberately offer options knowing most people simply won't and thats how they get away with it.
- geoduck14 5y ago
  I joined a private company a couple of months back. They gave me Options, but they made it clear they were "monopoly money" and gave me no ability to evaluate the value of the options - I accepted the offer EXCLUSIVELY based on the salary
6gvONxR4sf7o 5y ago
I was a late joiner at a near-IPO startup, and did better than I’ve ever done at an early stage one. Even then, I’ve done way better with post-IPO RSU refreshers than with the pre-IPO options. It took years for our publicly traded price to hit what management delusionally (or dishonestly) messaged us as our options’ worth pre-IPO. I remember a conversation when we got new ISO grants, that they might be worth $X, based on blah-blah-blah, but they’ll be worth at least $2X soon because we’re growing, so really you’re getting $2X! Which doesn’t even make sense to me if we’re going to view today’s price as a discounted future cashflow. Anyways, we’re finally trading at $X today, years and years after IPO. Moral of the story is that the people budgeting how much to pay you will engage with incredibly wishful thinking when deciding how much to pay you if they can. “Sure, Z shares seems super generous, right? We’re a rocket ship!” But when the market decides how much a share is really worth, they can’t screw you by pretending they’re paying out more. I’m only working for public companies from here out. And none of those 1 year grants that seem to be popping up.

danrocks 5y ago

I made $10k on a $138m sale and $50k on a $125m sale. I am that early Engineer you speak of.

leetrout 5y ago
Did you know the cap tables at those companies?
- danrocks 5y ago
  I don't think anybody knew the cap table for those companies. To be more precise: one of them didn't even have a cap table, the other was a secret between the lead investor and the original owner (an incubator). Needless to say nothing was disclosed to engineers, or any one of them for that matter. Even in this state, both companies raised a shitton of money.
  - leetrout 5y ago
    This is what had been surprising to me in my experiences... first few startups the cap table was shared info but no specifics (investor pool 33%, employee pool 7%, etc) so at least you knew the rough outlay. Then one recent startup was championing transparent salaries but wouldnt share anything about the cap table which seemed odd to me. My current company the CEO answers questions about the stock outlay but not specifics but also doesnt claim to be transparent. I just assumed from my earliest experiences most small companies were happy to explain the cap table and walk folks through dilution events.
    - bingohbangoh 5y ago
      Cap tables can change very quickly too. Even if you know at the beginning, you’re not privy to any changes later on.
      - leetrout 5y ago
        Sure. More the reason to have a rough representation that is public in a transparent company. Cant make good decisions without full information.
  - sokoloff 5y ago
    > To be more precise: one of them didn't even have a cap table A cap table is a representation of ownership. Saying a company doesn’t have one is like saying I don’t have a height.
    - danrocks 5y ago
      So you’re infinitely short? Joking. What I meant is that the cap table was not disclosed and changed so often that nobody really knew what it was at a given moment in time.
bingohbangoh 5y ago
Were you given a signing bonus to stay on after the acquisition?
binbag 5y ago
But was this a surprise to you? Did you expect to make more money from the sale of the company, and if so, why?
- aerosmile 5y ago
  Because most of the shiny things in SF were paid for with equity. And there are plenty of shiny things in SF. I am not saying you should work for equity, but I think you should realize why the real estate is as expensive in SF as it is. There are plenty of times when people got screwed over, and there are also - fewer, but enough to move the market - people who didn't. So when you ask the question "how could you have been so incredibly stupid to believe that equity is not worth $0," you just have to look around yourself and ask "how come that zillow lists so many properties for over $10m?" You shouldn't count on your equity returning anything, but you also shouldn't listen to people who take an overly unhealthy view at the potential upside.
  - potatolicious 5y ago
    I’m willing to bet good money that the real estate in the SFBA is driven much more heavily by FAANG stock than startup stock… Startups mint multi-millionaires. FAANG does it at scale day in and day out.
    - aerosmile 5y ago
      Even at FAANG, not enough people have the seniority for their base salary to turn them into buyers of $10m homes. I appreciate your point that RSUs are different from options, but I still think it's indicative that cash rarely comprises the majority of the wealthy people's income.
      - potatolicious 5y ago
        Oh, fully agreed that cash rarely comprises the majority of wealthy people's income - but my point is that most of the tech wealthy in the SFBA comes from FAANG equity wealth, not startup equity wealth. Startups exits sometimes make a handful of people mega-rich, but as this thread has revealed, making ordinary employees rich is quite rare. Not so rare are the people who hang out at FAANGs, collecting large amounts of equity, and riding the industry up. And yeah, the wealth in this case is typically not of the level to buy $10M homes, but $2M homes? Once in a while you have a founder who strikes it rich, but that effect is overwhelmed by the more numerous folks just riding $GOOG, $AAPL, $FB, etc. to multi/deci-millionaire status.
kabdib 5y ago
I lost $8K on a $40M sale. Lost another $10K when a company "extinguished" prior shares (they are now worth $7B). This is basically legalized gambling with a house that's allowed to have a rigged table. If you want to do well, become a senior engineer at a FAANG.

hijinks 5y ago

i know an early engineer who worked for a well known founder 10 or so years ago. The company was sold to a large tech company for like 350mil but what happened first is the VCs/founders created a new company and sold the IP from old company to new company and sold the new company for the 350mil leaving the employees with a worthless company. So also trusting the founders and the VCs they choose are in my opinion more important then any equity grant offer

lelandfe 5y ago
Jesus, name and shame. That kind of behavior should follow those founders like a sign hanging from their neck saying "don't work for me."
treeman79 5y ago
That would be a fairly straightforward lawsuit as a company cannot intentionally defraud its own shareholders.
- namdnay 5y ago
  If the employees had options they weren’t shareholders (yet)
  - aerosmile 5y ago
    That's a straw man argument. If you had an interest of any kind in a company, and someone screwed you, you can sue. In today's environment, companies will settle even if they have a good case, let alone if they are likely to lose. Plenty of lawyers will take such a case and get paid in a contingent fee arrangement.
piinecone 5y ago
Hey, my old cofounder just did this to me!
deleted 5y ago
[deleted]

almost_usual 5y ago

Made 15k on a 100m+ sale, was at the startup for years. I’ll stick to RSUs. Saying you helped exit a company seems to go over well in interviews though.

danrocks 5y ago
I have learned my lesson. Been at large company with fat RSUs for 5 years now.
anonymousDan 5y ago
Why is an RSU better than other types of shares, and how does it avoid this kind of dilution/backstabbing by founders? Honest question!
- potatolicious 5y ago
  I take RSU to mean “RSUs in a publicly traded company” - i.e., the value of the shares is well known and the sort of “sell the IP and fuck the employees” shenanigans is much harder to pull off. You can get RSUs in private startups which doesn’t mitigate the risks being discussed here. That said there are still benefits to having RSUs over options (i.e., 90 day exercise window).
  - 6gvONxR4sf7o 5y ago
    I also take it to mean RSUs in a public company. I wouldn’t want RSUs in a private startup because I couldn’t sell them, but I’d still take the tax hit as they vest.
    - travem 5y ago
      The availability of double trigger RSUs help mitigate that
- sethammons 5y ago
  RSUs are actual stock that can be sold on the market. Options are the ability to buy a share in the future at a given price. One is real money now and the other is maybe money later.

mbesto 5y ago

Which is why it would be entirely reasonable for someone who is granted stock as part of compensation to do a full diligence on the company before accepting the terms. Companies deliberately offer options knowing most people simply won't and thats how they get away with it.

geoduck14 5y ago
I joined a private company a couple of months back. They gave me Options, but they made it clear they were "monopoly money" and gave me no ability to evaluate the value of the options - I accepted the offer EXCLUSIVELY based on the salary

6gvONxR4sf7o 5y ago

I was a late joiner at a near-IPO startup, and did better than I’ve ever done at an early stage one. Even then, I’ve done way better with post-IPO RSU refreshers than with the pre-IPO options. It took years for our publicly traded price to hit what management delusionally (or dishonestly) messaged us as our options’ worth pre-IPO. I remember a conversation when we got new ISO grants, that they might be worth $X, based on blah-blah-blah, but they’ll be worth at least $2X soon because we’re growing, so really you’re getting $2X! Which doesn’t even make sense to me if we’re going to view today’s price as a discounted future cashflow. Anyways, we’re finally trading at $X today, years and years after IPO. Moral of the story is that the people budgeting how much to pay you will engage with incredibly wishful thinking when deciding how much to pay you if they can. “Sure, Z shares seems super generous, right? We’re a rocket ship!” But when the market decides how much a share is really worth, they can’t screw you by pretending they’re paying out more. I’m only working for public companies from here out. And none of those 1 year grants that seem to be popping up.