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DataRobot employee resigns over stock sales
- gigatexal 4y agoI’d be livid, too. Torch the founders and the mgmt team.
- enahs-sf 4y agoIts not even founders. Its execs that came in after founders got pushed out.
- hash872 4y agoCan I ask two dumb questions though? If DataRobot is doing so poorly- why did investors want to purchase the executives' shares? Presumably they are sophisticated investors and had a look at the company books, etc. So let's say they liked what they say, and it made sense for them to purchase a certain amount of DataRobot shares. If that's the case- why not let the employees sell to the investors too? If there's a pool of investors who are willing to purchase X number of shares at Y value, presumably either they or other investors would like to purchase 3X number of shares.... Wouldn't this be win-win, the employees can sell if they like, and the investors can buy if they'd like? Why not allow that too?
- atwood22 4y agoBecause this was a decision made by the executive team to cash out their own shares? If they let employees sell, then the executives could sell fewer shares. Isn’t that obvious?
- adrr 4y agoEmployees can sell to the investor. I don’t think investors want to manage 100+ stock sales including sending in tax forms etc. There are active secondary market to sell shares in private companies.
- marcinzm 4y ago>There are active secondary market to sell shares in private companies. Some startups make is harder by having a clause of first refusal for selling stock.
- adrr 4y agoFirst right refusal just gives the company/current investors first dibs at any potential stock sale.
- ska 4y agoSome have no secondary sale clauses too. Depending where you are they may not be enforceable. Or you any have got RSU’s that aren’t saleable the way anyhow. For very small/early startups, there may not be an effective secondary market at all, let alone permission to participate in a raise.
- marcinzm 4y agoSure and that means investors are much less likely to buy the stock. They go through all the effort and then if it's a good deal someone else buys it instead. Some secondary markets will outright refuse to deal with shares that have such clauses.
- nathanvanfleet 4y agoThis is a real "why did the scorpion sting me?" sort of question
- phphphphp 4y agoExecutives are incentivised to liquidate as soon as possible because unrealised gains in a startup are very risky. Executives are disincentivised from allowing employees to liquidate because the illiquid nature of the stock is a large part of what keeps the employees working at the company. This happened in 2021, anyone will buy anything when the market is doing well. DataRobot is doing badly by 2022 standards, by 2021 standards it was a great investment simply by virtue of being an investment — it’s hard to overstate how absolutely batshit the private market was in 20/21.
- ska 4y agoIt may have been smarter to do this. In general letting any earlier equity holders into a round effectively reduces the amount of cash you end up with, so there is no reason to do it except keeping those equity holders happy. It’s also a bit harder to manage with a bunch of smaller blocks, but you can pool this easily enough. It’s always going to be a balance, but it might have been better to allow anyone to include a small percent of vested stock in the round (to the same total amount ) rather than just let execs cash out.
- lostdog 4y agoThe compensation model for pre-RSU startups is broken right now. The combination of late exits, short exercise windows, and heavy taxes on illiquid gains, means you can wind up deeply in the red as often as in the black. In my last job search all the startup founders whined about not being able to keep up with big company comp, but I can't justify giving up X00,000 RSU's for the real possibility of going deeply into debt. The reward structure needs to change so there's good chances of being rewarded. It's a shame. I love working in these tiny startups, but I can no longer justify it.
- davedx 4y agoWork at tiny startups as a contractor, I highly recommend it! All the motivation and autonomy and sense of achievement and none of the messy complicated risky stock option stuff :)
- altdataseller 4y agoDont you have to constantly find new gigs because these tiny startups keep going out of biz?
- bombcar 4y agoSame as if you were working for the startup directly, and as a contractor nobody will complain if you line up additional gigs on the side.
- capableweb 4y agoI'm kind of doing the same thing, usual stint at each of them range between 1-2 years, I'm fine jumping at that point as the company already grew too big for me to be comfortable. All of them are still ongoing, runways have been 6-12 months each time I joined.
- davedx 4y agoThat’s happened once so far yeah :) so generally I tend to move on before companies go under
- mobileexpert 4y agoSecondary sales and secondary sales rights generally impoverish the common engineer versus founders and exec management. It is extremely rare to find a scale-up that has had secondaries that put non-founder non-execs on equal footing. So sadly it is just business as usual in our industry.
- kitanata 4y agoI recently left DataRobot to join another company. I was there a little over a year so I don’t have much stake in this controversy. There are a lot of good people at DataRobot but I’ve seen quite a bit of turmoil in my short tenure there. I hope they are able to get through it and survive.
- cs702 4y agoDataRobot executives should be ashamed for cashing out at the expense of all employees, many of whom apparently borrowed to buy shares at prices far above current ones. The risk of an exodus looks significant -- and that would be a death knell for the business. A company that bills itself as having depth of expertise in AI & ML cannot afford to lose the employees who actually have that depth of expertise.
- darth_avocado 4y agoIt’s a grift. The execs are not incentivized to act in the best interests of the company they work for. So most of them try to optimize for their own gains. For example, execs who are incentivized to “improve operational efficiency” can fire a bunch of people, make the others work longer and collect their bonuses. Eventually when the burnout hits, the morale drops and people leave, a different exec (and in a lot of cases the same one) will be tasked with “meeting growth targets”. They will hire more people, collect their checks and the grift goes on.
- ska 4y agoIn this particular case, it the sentiment in the tweet is true it’s arguable the board screwed up. I’m assuming of course the sale plan was approved there (otherwise deeper problems).
- enahs-sf 4y agoWhile I think there is a certain moral bankruptcy in the individuals for looking out for themselves over the employees writ large, I think in this particular case the board is certainly culpable for allowing these types of shenanigans to take place.
- hengestone 4y agoData point fwiw: the company I work for SOLD me some of their shares when I joined. I.e. not a grant. The company owns options to buy back the shares on the usual schedule of a cliff after one year, then monthly for 4 years. So no tax consequences until I sell the shares and pay capital gains. The caveat is that the valuation that they sold the shares at must be well below their last raise for it to make sense for me to buy the shares. So it only really works for early stage companies. After this early stage is over, selling me actual options works better.
- lbotos 4y agoSo, they had 1000 shares, and said "if you pay $1000 (1/share) that these shares are now yours? If so, and there is a gap between what you paid, and what your 409a says the value of the shares at purchase time, you owe tax on the difference, now. And you are saying that the company also has an options contract to buy back those shares? why? It feels like either this company is trying some advanced scenario with a bit of risk, or doesn't actually understand the value of options. Why go through all of that when they could just give you options?
- hellcow 4y agoThis is what’s typically done for founders—it’s called reverse vesting where the company gradually loses the right to repurchase them over time. Generally this is done when the company is new, pre-409a. There’s nice tax advantages to this approach if you make an 83b election since the shares start counting toward long-term capital gains immediately.
- lbotos 4y agoThanks! That does make a lot of sense for founders, but OP mentioned "the company sold him shares" which leads me to some sort of weird pseudo options thing. Hoping they can clear that up so I can understand more. Reverse vesting seems way more straightforward: you sign, you get equity immediately, company can take back any at agreed upon price at whatever intervals defined in the contract.
- anewpersonality 4y agoCan someone tldr what happened I dont have sympathy for someone who took out huge loans expecting to make bank but didn't.
- rl1987 4y agoCommon wisdom is that startup equity is merely a bunch of lottery tickets due to odds being systematically against employees becoming rich from that, despite founders and upper management talking otherwise. Unsurprisingly, some people lost the lottery.
- jwilber 4y agoImagine working 10 years and having someone come in for less than 1 year, completely fail in their role by all metrics, yet have the ability make millions of your work, at the direct expense of your compensation. Should be criminal.
- mavelikara 4y agoMost startups, at the cusp of IPO, go through this.
- aurelius83 4y agoI’m a bit ignorant to RSU’s and secondary markets. Why were the executives able to sell but not regular employees? What stopped regular employees from selling ?
- Elof 4y agoIt just comes down to who the board allows to sell stock and at what time. Most option contracts don’t allow sale of stock to secondary markets without approval and rank and file employees have much more restricted stock. Often founders and key executives will also get some liquidity and stock top up during funding rounds while no one else at the company has that option. By the time a company goes public most founders and key execs have already made quite a bit of money on the side.
- lbotos 4y agoIf a company is private then you cannot sell/purchase shares on public markets. So, execs can go fundraise, which is selling shares to new investors. But what shares are they gonna sell? Newly minted ones, or shares someone already own? The execs get to decide. In theory, there is no reason that "regular" vested employees couldn't also sell shares if execs designed it that way, beyond some complexity in management overhead (think figuring out information for 1000 people vs 10) as well as "turnover risk" where employees can cash out and leave. Now you are saying, well, seems like employees are gonna leave now without cashing out, and you are right. That's why it's dumb. Poor decision making by execs. I'm sure there are a lot of people at datarobot that didn't even know this, and are just learning this now. (Unless execs want both to make a lot of money and re-form the company, if that's the case, well then, great decision making by the execs)
- jwsteigerwalt 4y agoDon’t be a sucker. Either get paid or get real assets that have a real likelihood of ending up liquid and worth something. Corporate governance matters, startup/vc arrangements are inherently tilted toward the execs, founders and external financiers, but there is a burden on the employee to understand what your getting into. If your smart enough to work for one of these, your smart enough to learn the basics of corporate equity law.
- dreamcompiler 4y ago> If your smart enough to work for one of these, your smart enough to learn the basics of corporate equity law. Maybe in theory, but that doesn't work for me. I can build a computer out of a bucket of transistors and then program it to recognize your grandma, but the minute somebody starts trying to explain equity compensation my eyes glaze over. Then when somebody tries to explain the myriad ways the IRS can ruin my life with every mechanism of equity compensation, I run for the hills. Just pay me cash, thank you very much. And a lot of it.
- davidwritesbugs 4y agoexactly, you've got a tech skillset you shouldn't need to acquire a corporate & legal skillset to understand how you'll get remunerated, or pay an accountant/lawyer $X to get advice.
- ChrisMarshallNY 4y agoHere's a fairly good Boston Globe article on the company: https://www.bostonglobe.com/2022/07/13/business/once-heralded-boston-ai-startup-datarobot-struggles-under-west-coast-leadership/ https://www.bostonglobe.com/2022/07/13/business/once-heralde...
- mavelikara 4y agohttps://archive.ph/DrYES https://archive.ph/DrYES
- 11101010001100 4y agoLoyalty is near akin to naivety in the game 'Capitalism 2.0'.
- deleted 4y ago[deleted]
- eyeball 4y agoHow much better is their tooling vs what you can get right out if aws GCP azure?
- malshe 4y agoI want to know this too. With some good autoML libraries out there what’s the differentiation for DR?
- hedora 4y agoIs there a public list of startup execs / VCs that have screwed over employees in the past? (The 11th-hour Skype dilution event also comes to mind.) It'd help to have such a thing for future job searches.
- deleted 4y ago[deleted]
- immigrantheart 4y agoWe should put it in list in a Github markdown file.
- haram_masala 4y agoSeems like a lawsuit magnet.
- ngc248 4y agoWhy would that be? All of it would be factual/public info no?
- wdr1 4y agoIs there a TL;DR on what happened?