4 ms·

They aren't buying them for the business upside, but to force the business to buy its own ecosystem of Fintech products.

notahacker 3y ago
Doesn't make any sense to do that without a financial upside as well, as the businesses are unlikely to spend more their entire valuation on fintech products (and 84 mom and pop shops owned by the VC signing up isn't much of an illusion of growth to boost the fintech companies' valuation either)
- ralferoo 3y ago
  The financial upside is that they also own 85% of the company shares, so get 85% of the profits, reducing to 20% over 20 years by selling shares back to the employees. Selling here implies they'll also make profit from that too.
  - sangnoir 3y ago
    Employees who'll likely withstand lower than market rate wages and/or poor conditions because of sunk-cost fallacy. Sucking up profits from both the captive businesses using software licensing, revenue, and employees (as they buy shares from the startup) is well-thought-out evil genius, OR a path towards fully automated luxury worker-led communism, but I'm guessing it's the former in the guise of the latter.
    - deleted 3y ago
      [deleted]
  - smeej 3y ago
    The article said diluting, not selling, so I don't think it does apply here that they'll profit from that process.
    - robotresearcher 3y ago
      The fine article says: "we sell our stock back over time to the companies until it becomes 80% employee owned"
      - jeremyjh 3y ago
        That’s how it looks on the books but it has to be part of compensation - it’s booked that way in the GL with the company paying for the shares as incentive out of earnings. Employees in these kinds of business just aren’t going to be buying stock in the company they work for.
        robotresearcher 3y ago
        Right, but as the small company is on the hook to buy the shares from the parent company, before passing them to the employees as comp, the parent company gets cash for their stake.
- foobiekr 3y ago
  Juicing growth for a pump and dump scheme probably.
- pdonis 3y ago
  > the businesses are unlikely to spend more their entire valuation on fintech products If the fintech company has a controlling interest in the business (more than 50% of the share ownership), what's to stop them?
wombat-man 3y ago
"force" sounds so dark. Small businesses use all kinds of solutions to run themselves. They want to end up with a product that they can pitch to external businesses, it's more like they are using these acquired businesses as market research and testing.
monkeydust 3y ago
Are they forced? You would imagine contractual in someway they might be but should the owners be able to tender out and shop around ?
shostack 3y ago
That's one helluva customer acquisition model.

notahacker 3y ago

Doesn't make any sense to do that without a financial upside as well, as the businesses are unlikely to spend more their entire valuation on fintech products (and 84 mom and pop shops owned by the VC signing up isn't much of an illusion of growth to boost the fintech companies' valuation either)

ralferoo 3y ago
The financial upside is that they also own 85% of the company shares, so get 85% of the profits, reducing to 20% over 20 years by selling shares back to the employees. Selling here implies they'll also make profit from that too.
- sangnoir 3y ago
  Employees who'll likely withstand lower than market rate wages and/or poor conditions because of sunk-cost fallacy. Sucking up profits from both the captive businesses using software licensing, revenue, and employees (as they buy shares from the startup) is well-thought-out evil genius, OR a path towards fully automated luxury worker-led communism, but I'm guessing it's the former in the guise of the latter.
  - deleted 3y ago
    [deleted]
- smeej 3y ago
  The article said diluting, not selling, so I don't think it does apply here that they'll profit from that process.
  - robotresearcher 3y ago
    The fine article says: "we sell our stock back over time to the companies until it becomes 80% employee owned"
    - jeremyjh 3y ago
      That’s how it looks on the books but it has to be part of compensation - it’s booked that way in the GL with the company paying for the shares as incentive out of earnings. Employees in these kinds of business just aren’t going to be buying stock in the company they work for.
      - robotresearcher 3y ago
        Right, but as the small company is on the hook to buy the shares from the parent company, before passing them to the employees as comp, the parent company gets cash for their stake.
foobiekr 3y ago
Juicing growth for a pump and dump scheme probably.
pdonis 3y ago
> the businesses are unlikely to spend more their entire valuation on fintech products If the fintech company has a controlling interest in the business (more than 50% of the share ownership), what's to stop them?

wombat-man 3y ago

"force" sounds so dark. Small businesses use all kinds of solutions to run themselves. They want to end up with a product that they can pitch to external businesses, it's more like they are using these acquired businesses as market research and testing.

monkeydust 3y ago

Are they forced? You would imagine contractual in someway they might be but should the owners be able to tender out and shop around ?

shostack 3y ago

That's one helluva customer acquisition model.