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So… according to Crunchbase the entire amount of funding poured into this startup was $310M. I assume the founders don’t get anything out of this sale? https:
by baxtr 4y ago
So… according to Crunchbase the entire amount of funding poured into this startup was $310M.
I assume the founders don’t get anything out of this sale?
https://www.crunchbase.com/organization/fungible-inc https://www.crunchbase.com/organization/fungible-inc
- zeusk 4y agoNope, nor do rank-and-file employees.
- Mandatum 4y agoThat's a hell of an assumption. They'd have FU money, they don't run a charity.
- hn_throwaway_99 4y agoInvestors normally always have at least 1x liquidation preferences. Common stock is usually always wiped out when a company is sold for less than it raised.
- zeusk 4y agoYou think the investors that invested $310M on a $190M ran a charity?
- mahkeiro 4y agoYou think that employee that work for nothing in exchange of worthless options are also working for a charity?
- donkeyd 4y agoYes, they pretty much are. It's trickle up economics in this world. Employees only work for the benefits of investors and executives.
- zeusk 4y agoWhat's your point? Labor is compensated peanuts in comparison to capital. Neither is a charity, just that employees are materially worse off in these cases.
- ClumsyPilot 4y agoI always wondered about this - if capital interest rates are low, shouldn't capital be getting compensated very little? Shouldn't labour be worth more?
- meheleventyone 4y agoCapital has the power so nope.
- qbasic_forever 4y agoThe founders might have been able to take money out by selling some of their preferred shares in later financing rounds though.
- baxtr 4y agoThrough "secondary sales"?
- hn_throwaway_99 4y agoFounders basically never get preferred shares.
- ayewo 4y agoWell, it seems they did, at least according to this source mentioned in TFA https://www.semianalysis.com/p/fungible-dpus-are-dead-carcass-acquired https://www.semianalysis.com/p/fungible-dpus-are-dead-carcas... > ... an unannounced incestuous funding round that had preferred equity and liquidation preferences, which was mostly the founder’s money.
- thaumasiotes 4y agoWho decides to issue preferred shares? What would stop the founders from having them?
- dustingetz 4y agoliquidation preference protects investors from founder fraud. say you invest $1M for 20% at 5M valuation in a preseed round where the founder has nothing and then a day later the founder liquidated the company for the value of cash assets, keeping 800k of your money. also preferred has a different voting structure, making it easier for investors to fire the CEO
- thaumasiotes 4y agoFounder fraud? If I own shares in a company, and then the company issues more shares, am I a victim of fraud? Are you actually attempting to answer my question, or are you saying something unrelated?
- Cthulhu_ 4y ago> I assume the founders don’t get anything out of this sale? Why wouldn't they? They start by owning 100% of the company. They sell a % to investors - say, 50% for $300M, which is put into the company. That still leaves them with 50% ownership. Selling the company - or their stake in it - for $190M will still mean they get half of that. On top of other things, like continued employment by the new owner and other enticements for them to either keep working or leave. Disclaimer: this is armchair logic from someone who doesn't know how this works and lives half a world away.
- hn_throwaway_99 4y agoWell, at least you added a disclaimer! Because this isn't how it works - founders have common shares, investors have preferred shares and usually always get paid back first.
- senko 4y agoIf investors have liquidation preference (https://www.investopedia.com/terms/l/liquidation-preference.asp https://www.investopedia.com/terms/l/liquidation-preference....), founders (and employees, etc) can get zero.
- baxtr 4y agoI am also not too familiar with these agreements. But I have heard that there are complicated contracts in every investment. There are for example things like liquidation preferences. Meaning first all VCs get their invested money back and after that the remainder is split.
- danpalmer 4y agoA liquidation preference of 1 is the default and unlikely to be lower. Higher does happen but not as common. They almost certainly won’t get anything.
- marcinzm 4y agoThey'll possibly get some money for making the deal happen at all likely as a retention bonus or severance bonus.
- spaceman_2020 4y agoThe meta game of late has been to keep cashing out at every fundraising round, and to negotiate for a fat salary.