7 ms·

This is a success story no doubt; a $25 million exit in under 3 years and with just ~$1 million in funding is obviously a better outcome than what the vast majo

This is a success story no doubt; a $25 million exit in under 3 years and with just ~$1 million in funding is obviously a better outcome than what the vast majority of startups will ever realize. But it also highlights just how hard it is to realize a meaningful windfall as a startup employee. Even if you assumed that the 12 non-founder employees equally split 50% of the company (which is almost certainly high), likely none would net $1 million after exercising their options and paying taxes. What's worse: the vast majority of this deal was paid for in stock. The Marin Software stock chart over the past two years is not very inspiring, which is especially interesting given how good the market has been to so many other tech/software companies. In an all or mostly stock deal involving a public company, you are ideally acquired by a company with a rich valuation. That's not the case here. The $2.7 million in equity retention grants, if split equally amongst 12 employees, adds $225,000 for each, but that too is stock and the employees have to stick around and work for it. I don't know much about the acquirer, but working for stock that has for some reason languished during one of the most impressive bull markets in history isn't a very compelling proposition. This all seems lost on the founder of the company. I can't help but wonder if it's lost on the employees too.

jjfine 12y ago
It's still probably huge for their net worth.
gibybo 12y ago
Is there anything preventing the employees/founders from just immediately selling the Marin stock for its cash value? It's a public company so it should be trivial to sell for very near the same value given in the deal.
- ryanburk 12y ago
  having been involved with a few acquisitions in the past, usually the terms of the deal have a lock in period where you can't sell to aid in retention. then you add on top of that new retention grants to handcuff folks as best you can.
ryanburk 12y ago
really well said. I think too often people think that working at a startup and getting acquired will be a road to riches. not that $200k isn't a huge amount of money, but if you look at the payout over the number of years invested for a non-founder level of options, you are not likely going to get paid disproportionately to a google or facebook salary. and this isn't a commentary that people shouldn't get involved in startups, but mentoring junior folks I just see a lot of $$$ in their eyes thinking they will hit whatapp type exits when in reality it is in a very good case scenario similar to what is described above.
- colmvp 12y ago
  If anything, on HN users constantly talk about the fact they'd never work at a startup unless they were a co-founder or a late stage employee.
AndrewBissell 12y ago
I can't speak for Brad or any of my colleagues, but personally I am reticent for obvious reasons to comment on the prospects for Marin Software stock. That said, I have a pretty deep background in markets and trading, and can think of all kinds of reasons a stock might not move higher in the first year after its IPO while other stocks in the same sector have rallied, none of which include "it's a bad company." A value-minded investor (of which I am not necessarily one, but it's another perspective) would be happier to get the stock at a lower price than a higher one. No, I was not born yesterday, and yes, I'm happy with the deal even given its attendant risks.
- 7Figures2Commas 12y ago
  Marin Software might be an incredible company that's currently undervalued and therefore an arguably attractive investment. Anybody who believes that can go out and purchase Marin Software stock and profit if its value increases. If the Perfect Audience deal was all cash, and each employee netted $750,000, how many employees do you think would go out and purchase $750,000 in Marin Software stock? When employees fail to cash out as soon as they're able, they are effectively investing their money in their new employer. The challenge for rank-and-file employees who hold stock in a company with a languishing stock price is that they often start to think about hypothetical gains. "My stock is worth $600,000 today, but once the market realizes how great the company is, the stock price could double and I'll be a millionaire." This thinking is especially appealing when you haven't netted millions from an acquisition because six or low seven figures really isn't as life-changing as many believe it will be. Heck, in the most desirable parts of the Bay Area, $750,000 won't even buy you a "starter home."
  - AndrewBissell 12y ago
    Your point here seems to be that cash is preferable to stock as an acquisition payment, which is trivially true but not a very interesting point. Yes, an all cash deal would have been preferable to what we're getting. So would a 5x higher deal price. I'm sure lots of startup employees make a hash of things when they're first presented with an uncertain windfall in the form of restricted stock. It's a risk we're all aware of and need to manage for ourselves, but that doesn't mean we've somehow been dealt a raw deal.
tlrobinson 12y ago
Working at a startup is a bit like angel investing... in a single company. Potentially large upside, but lots of risk, and zero diversification (unless you hop between startups year after year, but that's unsustainable) I wonder if it would be better (from a financial perspective) to work at a job with a higher salary and no stock options, then invest the additional salary in a number of early stage startups?
- 7Figures2Commas 12y ago
  Most of the millionaires in this country are self-employed, so statistically, owning a business probably the best way to get rich. Unfortunately, most startup employees, even though they have stock options, don't have a meaningful enough ownership stake. This said, if you're going to earn a high salary as an employee and want to invest heavily, I don't know why you would focus on startups. Most fail, it can take years for the equity to be liquid if ever, the equity is extremely vulnerable, valuations are currently exorbitant, and you can only bet in one direction. The public equities markets are far more attractive.

jjfine 12y ago

It's still probably huge for their net worth.

gibybo 12y ago

Is there anything preventing the employees/founders from just immediately selling the Marin stock for its cash value? It's a public company so it should be trivial to sell for very near the same value given in the deal.

ryanburk 12y ago
having been involved with a few acquisitions in the past, usually the terms of the deal have a lock in period where you can't sell to aid in retention. then you add on top of that new retention grants to handcuff folks as best you can.

ryanburk 12y ago

really well said. I think too often people think that working at a startup and getting acquired will be a road to riches. not that $200k isn't a huge amount of money, but if you look at the payout over the number of years invested for a non-founder level of options, you are not likely going to get paid disproportionately to a google or facebook salary. and this isn't a commentary that people shouldn't get involved in startups, but mentoring junior folks I just see a lot of $$$ in their eyes thinking they will hit whatapp type exits when in reality it is in a very good case scenario similar to what is described above.

colmvp 12y ago
If anything, on HN users constantly talk about the fact they'd never work at a startup unless they were a co-founder or a late stage employee.

AndrewBissell 12y ago

I can't speak for Brad or any of my colleagues, but personally I am reticent for obvious reasons to comment on the prospects for Marin Software stock. That said, I have a pretty deep background in markets and trading, and can think of all kinds of reasons a stock might not move higher in the first year after its IPO while other stocks in the same sector have rallied, none of which include "it's a bad company." A value-minded investor (of which I am not necessarily one, but it's another perspective) would be happier to get the stock at a lower price than a higher one. No, I was not born yesterday, and yes, I'm happy with the deal even given its attendant risks.

7Figures2Commas 12y ago
Marin Software might be an incredible company that's currently undervalued and therefore an arguably attractive investment. Anybody who believes that can go out and purchase Marin Software stock and profit if its value increases. If the Perfect Audience deal was all cash, and each employee netted $750,000, how many employees do you think would go out and purchase $750,000 in Marin Software stock? When employees fail to cash out as soon as they're able, they are effectively investing their money in their new employer. The challenge for rank-and-file employees who hold stock in a company with a languishing stock price is that they often start to think about hypothetical gains. "My stock is worth $600,000 today, but once the market realizes how great the company is, the stock price could double and I'll be a millionaire." This thinking is especially appealing when you haven't netted millions from an acquisition because six or low seven figures really isn't as life-changing as many believe it will be. Heck, in the most desirable parts of the Bay Area, $750,000 won't even buy you a "starter home."
- AndrewBissell 12y ago
  Your point here seems to be that cash is preferable to stock as an acquisition payment, which is trivially true but not a very interesting point. Yes, an all cash deal would have been preferable to what we're getting. So would a 5x higher deal price. I'm sure lots of startup employees make a hash of things when they're first presented with an uncertain windfall in the form of restricted stock. It's a risk we're all aware of and need to manage for ourselves, but that doesn't mean we've somehow been dealt a raw deal.

tlrobinson 12y ago

Working at a startup is a bit like angel investing... in a single company. Potentially large upside, but lots of risk, and zero diversification (unless you hop between startups year after year, but that's unsustainable) I wonder if it would be better (from a financial perspective) to work at a job with a higher salary and no stock options, then invest the additional salary in a number of early stage startups?

7Figures2Commas 12y ago
Most of the millionaires in this country are self-employed, so statistically, owning a business probably the best way to get rich. Unfortunately, most startup employees, even though they have stock options, don't have a meaningful enough ownership stake. This said, if you're going to earn a high salary as an employee and want to invest heavily, I don't know why you would focus on startups. Most fail, it can take years for the equity to be liquid if ever, the equity is extremely vulnerable, valuations are currently exorbitant, and you can only bet in one direction. The public equities markets are far more attractive.