5 ms·

I have a friend who worked in a company that got "not acquired" in a similar deal. She didn't see a dime out of it, and was let off (together with a big chunk

by jbkkd 9mo ago

I have a friend who worked in a company that got "not acquired" in a similar deal. She didn't see a dime out of it, and was let off (together with a big chunk of people) within 6 months.

sigmoid10 9mo ago
As this gets more common, I think it will eventually lead to startups having a hard time attracting talent with lucrative equity compensation. It will be interesting to see how long it takes until this catches on among employees, but I already wouldn't take any positions in startups with a significant payment in equity anymore. The chances are slim that this pays out anyways, but now even when you are successful, noone will stop some megacorp from just buying the product and key employees and leaving everyone else with their stake in the dust.
- oblio 9mo ago
  With the job market being in the state it is in, there will always be people wanting to take their chances. Let's face it and accept that the golden days of people working in tech startup (and soon large companies) are over. RIP 1980 - 2023.
  - throwawayqqq11 9mo ago
    Looking at GDP, the golden age is still right here. https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=US https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?location... /s
    - seehafer 9mo ago
      Though (very) unevenly distributed
    - CuriouslyC 9mo ago
      Different kind of gold raining down on us now though
      - bugsense 9mo ago
        You should have just bought gold
        throwawayqqq11 9mo ago
        Naa, just wait, its dribbling down.
        bdangubic 9mo ago
        it always dribbles down after it dribbles up and then it dribbles down again…
    - SecretDreams 9mo ago
      Need this plotted against cumulative American debt lol
  - oblio 9mo ago
    LOL@Americans waking up. I guess you'll have to face the music at some point.
- zipy124 9mo ago
  It's already happening. You need a good lawyer to read equity terms to make sure you aren't going to get rug pulled by a founder later on. Even so I still consider equity to generally be worth zero unless the founder is someone I trust fully, since there are so many ways for them to legally not give you anything.
- kasey_junk 9mo ago
  At my last job search I didn’t consider any equity based startups seriously because of this trend. It was already such a tenuous path as it stood, but now with the norm established it seems like it’s become impossible for a rank and file employee to get paid out. I’m more curious how angel investors are being treated in these exits. If _they_ dry up the whole pipeline goes away
  - keeganpoppen 9mo ago
    that is a great point. it’s one thing to occasionally rugpull employees, who are still at least paid for their services and robbed only of their EV on their options (i say “only”, though i find this increasingly common practice to be absolutely deplorable, to be clear). but how could investors possibly be happy with this becoming the new normal? will it get to the point where these sorts of faux acquisitions also involve paying out investors and only shafting employees? at that point you are only really even getting like a 20% discount over acquiring the company outright, which hardly seems worth it. which is to say that your point is very astute: the investors are definitely the linchpin here.
    - baruch 9mo ago
      The company still got $20B of cash(?) in its books, it can pay dividends to its shareholders (investors) and they get their payment. The company can go down the drain afterwards. If it can still make money with its remaining assets that's only a nice small bonus. So the only ones getting shafted are the employees.
      - lumost 9mo ago
        I suppose the firm could simply roll the 20 billion into a long term asset. It’s not a big deal to anyone except employees if the asset never pays out. Departed employees would not be privy to how the money is eventually exited from the now shell company 20 years hence.
    - SecretDreams 9mo ago
      > will it get to the point where these sorts of faux acquisitions also involve paying out investors and only shafting employees? Yes, correct
- BLACKCRAB 9mo ago
  [dead]
- cmrdporcupine 9mo ago
  The equity in almost all startups has already been a bait and switch for more than a decade. Most will refuse to answer you about % of equity share anyways, but if they did it's tiny tiny amounts, and in the end half the time it's up to the acquiring entity just how seriously they end up taking it. If you landed at an entity like Google (as I did from the place I was working 15+ years ago) you could be treated well. Elsewhere, not great. During boom times it made more financial sense to go straight to a FAANG if you could.
- h2zizzle 9mo ago
  >As this gets more common Boy, it would be so nice if a major correction were to drain these massive companies' warchests so that it doesn't become more common.
- citizenpaul 9mo ago
  If you ask me there has been a major shift into trying to make "startups" into just another form of corporation. It started years ago when I started seeing things like "Founder Engineer - 0.5% equity" in jobs here.
Eridrus 9mo ago
Can you say more about why mechanically she didn't get anything? If you exercise your options you have real stock in the company, so I don't see how you can get shafted here. Did investors do some sort of dividend cash out before employees were able to exercise their options? (Obviously shady, but more about investors/leadership being unethical than the deal structure). Would love to know more about how this played out.
- kasey_junk 9mo ago
  Multiple share classes are the norm even before the new acquisition types we see here. It’s extremely common in an acquisition for employee shares to be worth nothing while investor and founder shares are paid out. But these new “acquisitions” aren’t even that. They are not acquisitions at all. They just hire the talent directly with perhaps an ip rights agreement thrown in as a fig leaf.
  - Eridrus 9mo ago
    I'm well aware of dual class shares, but preferences are typically 1x, and none of the deals were for less than the amount raised, so they're not relevant here. The fact that these are not really acquisitions doesn't change the fact that Groq the entity now has $20b.
    - depr 9mo ago
      Groq doesn't keep that money, it goes to VCs. They claim the company is "pivoting", not "selling" and avoid the payout trigger.
      - badestrand 9mo ago
        Money can't just "go" somewhere, it needs a reason first, at least for book-keeping. I mean, VCs can get their invested capital back but on top of that, how would that money be transfered? $20B is a lot and for sure the VCs will not just write an invoice of $18B for consulting services.
- 9mo ago

by jbkkd 9mo ago

I have a friend who worked in a company that got "not acquired" in a similar deal. She didn't see a dime out of it, and was let off (together with a big chunk of people) within 6 months.

sigmoid10 9mo ago

As this gets more common, I think it will eventually lead to startups having a hard time attracting talent with lucrative equity compensation. It will be interesting to see how long it takes until this catches on among employees, but I already wouldn't take any positions in startups with a significant payment in equity anymore. The chances are slim that this pays out anyways, but now even when you are successful, noone will stop some megacorp from just buying the product and key employees and leaving everyone else with their stake in the dust.

oblio 9mo ago
With the job market being in the state it is in, there will always be people wanting to take their chances. Let's face it and accept that the golden days of people working in tech startup (and soon large companies) are over. RIP 1980 - 2023.
- throwawayqqq11 9mo ago
  Looking at GDP, the golden age is still right here. https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=US https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?location... /s
  - seehafer 9mo ago
    Though (very) unevenly distributed
  - CuriouslyC 9mo ago
    Different kind of gold raining down on us now though
    - bugsense 9mo ago
      You should have just bought gold
      - throwawayqqq11 9mo ago
        Naa, just wait, its dribbling down.
        bdangubic 9mo ago
        it always dribbles down after it dribbles up and then it dribbles down again…
  - SecretDreams 9mo ago
    Need this plotted against cumulative American debt lol
- oblio 9mo ago
  LOL@Americans waking up. I guess you'll have to face the music at some point.
zipy124 9mo ago
It's already happening. You need a good lawyer to read equity terms to make sure you aren't going to get rug pulled by a founder later on. Even so I still consider equity to generally be worth zero unless the founder is someone I trust fully, since there are so many ways for them to legally not give you anything.
kasey_junk 9mo ago
At my last job search I didn’t consider any equity based startups seriously because of this trend. It was already such a tenuous path as it stood, but now with the norm established it seems like it’s become impossible for a rank and file employee to get paid out. I’m more curious how angel investors are being treated in these exits. If _they_ dry up the whole pipeline goes away
- keeganpoppen 9mo ago
  that is a great point. it’s one thing to occasionally rugpull employees, who are still at least paid for their services and robbed only of their EV on their options (i say “only”, though i find this increasingly common practice to be absolutely deplorable, to be clear). but how could investors possibly be happy with this becoming the new normal? will it get to the point where these sorts of faux acquisitions also involve paying out investors and only shafting employees? at that point you are only really even getting like a 20% discount over acquiring the company outright, which hardly seems worth it. which is to say that your point is very astute: the investors are definitely the linchpin here.
  - baruch 9mo ago
    The company still got $20B of cash(?) in its books, it can pay dividends to its shareholders (investors) and they get their payment. The company can go down the drain afterwards. If it can still make money with its remaining assets that's only a nice small bonus. So the only ones getting shafted are the employees.
    - lumost 9mo ago
      I suppose the firm could simply roll the 20 billion into a long term asset. It’s not a big deal to anyone except employees if the asset never pays out. Departed employees would not be privy to how the money is eventually exited from the now shell company 20 years hence.
  - SecretDreams 9mo ago
    > will it get to the point where these sorts of faux acquisitions also involve paying out investors and only shafting employees? Yes, correct
BLACKCRAB 9mo ago
[dead]
cmrdporcupine 9mo ago
The equity in almost all startups has already been a bait and switch for more than a decade. Most will refuse to answer you about % of equity share anyways, but if they did it's tiny tiny amounts, and in the end half the time it's up to the acquiring entity just how seriously they end up taking it. If you landed at an entity like Google (as I did from the place I was working 15+ years ago) you could be treated well. Elsewhere, not great. During boom times it made more financial sense to go straight to a FAANG if you could.
h2zizzle 9mo ago
>As this gets more common Boy, it would be so nice if a major correction were to drain these massive companies' warchests so that it doesn't become more common.
citizenpaul 9mo ago
If you ask me there has been a major shift into trying to make "startups" into just another form of corporation. It started years ago when I started seeing things like "Founder Engineer - 0.5% equity" in jobs here.

Eridrus 9mo ago

Can you say more about why mechanically she didn't get anything? If you exercise your options you have real stock in the company, so I don't see how you can get shafted here. Did investors do some sort of dividend cash out before employees were able to exercise their options? (Obviously shady, but more about investors/leadership being unethical than the deal structure). Would love to know more about how this played out.

kasey_junk 9mo ago
Multiple share classes are the norm even before the new acquisition types we see here. It’s extremely common in an acquisition for employee shares to be worth nothing while investor and founder shares are paid out. But these new “acquisitions” aren’t even that. They are not acquisitions at all. They just hire the talent directly with perhaps an ip rights agreement thrown in as a fig leaf.
- Eridrus 9mo ago
  I'm well aware of dual class shares, but preferences are typically 1x, and none of the deals were for less than the amount raised, so they're not relevant here. The fact that these are not really acquisitions doesn't change the fact that Groq the entity now has $20b.
  - depr 9mo ago
    Groq doesn't keep that money, it goes to VCs. They claim the company is "pivoting", not "selling" and avoid the payout trigger.
    - badestrand 9mo ago
      Money can't just "go" somewhere, it needs a reason first, at least for book-keeping. I mean, VCs can get their invested capital back but on top of that, how would that money be transfered? $20B is a lot and for sure the VCs will not just write an invoice of $18B for consulting services.
9mo ago