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Startup CEOs who gave up fortunes to turn employees into millionaires

230 points by whyleym 12y ago

kjs3 12y ago
They gave up some money to reward valuable employees. That's not, per se, being magnanimous or generous, it's being smart businessmen. All of these founders made out just fine, financially. When they start their next big thing, they'll be remembered not only as the guys who had a successful exit, they'll be remembered as the guys took care of their people along the way. That's about the smartest way to recruit top talent you can come up with.
- teej 12y ago
  I don't think you are giving these founders enough credit. Startup acquisitions, not unlike fundraising, can be very emotional. Acquirers can go from hot to cold very quickly if they hear the wrong thing or get the wrong vibe. The founders went to great lengths to structure the deal in a way that compensated their employees like this. It's likely that they put the entire deal at risk to do so. That, in my mind, strongly shows generosity on the part of the founder.
  - kjs3 12y ago
    per se: by or in itself or themselves; intrinsically. I understand that some (most) of these guys are, in fact, doing this because it's the right thing to do and they are, in fact, that invested. I merely wanted to point out, counter to the tone and implication of the article, that's not the only reason to do this and they were still handsomely rewarded for the risk they took. Conversely, I want to point out to anyone who thinks not doing the right thing wrt your team so you can pocket a few extra percentage points can have a negative consequence.
    - jacquesm 12y ago
      Sure they're smart businessmen (and women), they built awesome companies and successfully negotiated substantial exits. If they weren't smart then neither of those would have happened in the first place! But in the article there are some very good examples of situations where most C level teams and founders would have happily made off with the loot without sharing any of it with their co-workers, as one CEO in the article put it 'the ones they went to war with'. And there would be nothing or nobody to stop that from happening, and because this is 'normal' nobody would have likely even said anything about it beyond some grumbling at the watercooler and a maybe slightly higher turnover directly post acquisition. So I read their generosity as the first driver to do this, and that there maybe is another reason is possible but I've yet to see a repeat successful team which would allow the conclusion to be that the second reason is also a motivator. They're doing good, and good by their people, and that's about it. No need to search for an ulterior motive. And there are very few if any negative consequences to not doing 'the right thing' with respect to your team, because that - unfortunately - is business as usual. These are the exceptions, definitely not the rule. I hope it becomes more common though.
  - nilkn 12y ago
    I definitely agree with you, but I also like a term from the article: the founders were long-term greedy rather than short-term greedy. They were willing to give millions to their employees in exchange for what I can only assume to be life-long loyalty and an unbeatable reputation. For someone who wants to stay in the industry for the next 10-20 years and found more companies, that could very well end up being worth far more than the money given up in the deal to employees.
  - curun1r 12y ago
    FWIW, one of the founders in the article phrased it as being "long-term greedy." I'm sure it felt good to make millionaires out of employees (having been part of an acquisition where only ~10 people out of nearly 300 became millionaires, I can only imagine the parties we would have had if the majority of the people had gotten life-changing exits), but there was definitely an awareness of the long-term benefits among the founders in question.
- jacquesm 12y ago
  That's a pretty cynical worldview. If a founder doesn't have to share his wealth because of a bunch of paper and decides to do it anyway that is generous first and possibly good business second. After all there is no obligation on his part to ever do another start-up, there is no obligation on those rewarded to join in the future and the incidence of 'repeat teams' is low enough that I don't think it is a factor at all.
  - kjs3 12y ago
    Wait...I'm cynical?
- baddox 12y ago
  > That's not, per se, being magnanimous or generous, it's being smart businessmen. It's being both.
- kelukelugames 12y ago
  I think this is generous but it really should be the norm. People who join start ups suffer a huge opportunity cost--hundreds of thousands of dollars in RSUs
erobbins 12y ago
It's sad that this behavior is unusual enough to be noteworthy.
- vinceguidry 12y ago
  This comment reads as entitled to me. Startup founders have an insane number of things on their plate, and that list just keeps growing and growing. Startup employees work hard, but the founders still bear most of the risk and responsibility. What really needs to happen is for new ways to organize startups to distribute the risks and responsibilities better, so that it's not up to the goodness of the founder's heart to ensure a good outcome for the employees. Of course, this implies that the pie is being made bigger, the risks and responsibilities being spread out are actually building more value in the company so as to generate a bigger exit. So far though founder-level discipline and risk-taking is rare enough in one individual that this is the situation we have to deal with.
  - x0x0 12y ago
    And great employees can always go to {google, fb, twitter, microsoft, salesforce, etc} and get paid $250-$300 / year in cash or cash equivalents, instead of $125-$150 plus lottery tickets. In fact, I remember reading that round A is the worse time for an employee to join a startup: the large grants are gone, but the business isn't derisked, so your lottery tickets still have shit ev.
    - JimboOmega 12y ago
      Is the going rate $250-$300k these days? Honestly, though - beyond just larger equity grants, I'd like to see companies have people get rewarded when the company does well... Through some kind of bonus (in equity or cash). It seems like most companies either have bonuses that are pretty much an expected part of salary, or they have no bonus in any situation. I've only really been part of the latter, though.
      - x0x0 12y ago
clamprecht 12y ago
The article says: > There’s a startup in New York everyone talks about, and the things they say aren't very nice. The startup sold for ~ $80 million and the founders got rich. But, as the rumors go, no other employee made more than $50,000. Does anyone know which startup they are referring to? carrentals.com? something else?
- georgemcbay 12y ago
  Hunch fits the location and approximate acquisition price, but I can't speak to how screwed over the non-founders were (or weren't). Not sure that "everyone talks about" it (though that applies even more so for carrentals.com, IMO). Maybe they meant "everyone in NYC talks about it".
  - taylorbuley 12y ago
    With Chris Dixon being praised in the piece, I have trouble believing the writer had Hunch in mind.
    - georgemcbay 12y ago
      Good point! You're probably right.
- x0x0 12y ago
  digg seems to be famous for doing well by Kevin Rose and not by anyone else. It happens out in the valley too.
- jlintz 12y ago
  Sounds like GroupMe, sold for 80 mill and was around a year old at the time
- gyardley 12y ago
  'Everyone' isn't talking about this issue, so everyone's guess is just a guess. That said, Invite Media was acquired by Google for $81MM a couple years back.
abat 12y ago
Do employee stock options usually not vest automatically upon acquisition? The SinglePlatform story made it sound like employees get screwed if there's an early exit before their options had fully vested.
- jacquesm 12y ago
  That very much depends on the contract. I have said this before and I'll repeat it on the off chance that it will save someone's bacon one day: insist on accelerated vesting clauses in change of control situations.
  - ashbrahma 12y ago
    Is it easy to negotiate a change or add an acceleration clause in the options grant? Seems like those docs are set in stone and very hard to change without board approvals etc.
    - jacquesm 12y ago
      Then you go somewhere else. Nobody forces you to take a job with extra risks and a contractual situation that allows others to pull the rug out from under you when the pay-off materializes. Really, the only potentially bad contracts are the ones that you've signed. So as long as you haven't signed you have negotiation room and if your choice is between being paid 'market rates' versus being paid 'half of market rate + options' and those options are subject to change without notice then you're just setting yourself up for being hurt if you chose the second. Nothing is set in stone, that's more a matter of self-confidence and knowing when to walk away.
    - kijiki 12y ago
      The grant itself requires board approval, so that isn't a huge roadblock. The bigger issue is how much leverage you have. If you're experienced and they need you, getting double-trigger acceleration shouldn't be an issue, and it can't hurt to at least ask for single-trigger...
- aidenn0 12y ago
peter303 12y ago
Steve Wozniak for one. Steve Jobs wouldnt share his Apple stock with anyone. He repeated this with Pixar. In the 1980s a decent IPO would be about $100K for workers. It would go towards a home down payment.
vishalzone2002 12y ago
are there any such pre-exit companies out there?
Arjuna 12y ago
Although Woz wasn't a CEO... for those that don't know about this, I thought you would find it interesting [1]: "And when Jobs (in the movie, but really a board does this) denied stock to the early garage team (some not even shown) I'm surprised that they chose not to show me giving about $10M of my own stock to them because it was the right thing. And $10M was a lot in that time." [1] Woz's entire post is on this page: https://plus.google.com/+CarmsPerez/posts/GnVTvQNgvpf https://plus.google.com/+CarmsPerez/posts/GnVTvQNgvpf
- soperj 12y ago
  I truly hope that Woz is remembered as the guy behind Apple's early greatness and Jobs as just a dickhead who set us all back. Not just developers with his no compete bullshit, but everyone with his stupid no ports aesthetic. How are people supposed to learn to tinker when everything is locked down??
  - Ricapar 12y ago
    By his logic: Why would you want to tinker with something that's already perfect?
  - cjslep 12y ago
    I believe it was Steve Kent's The Ultimate History of Video Games Atari portion that really fleshes out Steve Jobs. The two anecdotes I remember are: 1. People in Atari generally considering him an oderous hairy hippie who once disappeared from work to go to India for self-enlightenment, but returned with Hepatitis. 2. He (Steve) was once offered $100 per transistor he could eliminate below the 100-transistor mark for an arcade game (I believe it was mid 150 count at the time), so he went to Woz and paid him on the order of $100 to eliminate the transistors (Woz was woefully unaware of the deal between Steve and Atari). Woz got it down in the low 30's or high 20's, Steve got the large sum of money and Atari wound up adding transistors back because while it worked they couldn't figure out how.
    - Cyph0n 12y ago
      Holy shit. ~30 transistors make a game? Woz was a genius.
discardorama 12y ago
Beyond a certain amount of money (I'll throw out a number and say, $10M), the incremental gain is not much. The change in your lifestyle in going from $0M to $5M is huge; but from $10M to $15M? Not much. So these CEOs are doing the smart thing (in addition to the nice thing). They know that when they get the inevitable itch to do the next startup, they can count on a stellar reputation and recruit some great talent.
- autism_hurts 12y ago
  I think a game changer cash position for most people is 2.5MM liquid -- not tied up in real estate. 5MM means you're flying business/first with your family anytime/anywhere. You may have a pied a terre somewhere. 10MM means you're angel investing, vacationing, and not generally "working" anymore. 15M++ means you bank with The Private Bank of Wells Fargo, have a ridiculous line of credit // no checking account, multiple properties, trust, etc.
  - refurb 12y ago
    $5M doesn't go that far anymore. If you're young and you have $5M, you could take 4-5% per year and make it last 40-50 years. That's only $250,000 per year, pre tax. Good money, but certainly not enough to not have to think about money anymore.
    - mikeyouse 12y ago
      Your $5M liquid would be earning interest the entire time too. With that much money, it'd be 'easy' to make 4% - 5%/year, so you could live on $250k/year and never touch the principle.
      - refurb 12y ago
        That was my point. A good rule of thumb is that you can pull 3-4% out of a investment each year and you will never run out. Increase that to 4-5% and it should last your entire life. Don't get me wrong, $250K per year pre-tax is a very comfortable lifestyle. However, it's not so much money that you can spend without thought.
apalmer 12y ago
I dont think startup CEOs have any requirement to do this type of thing. On the other hand I think there is a powerful reality distortion field around start ups. Its literally more work than at bigco, for about 70% of the salary, for a lotto ticket that has a 1 in 1000 chance of pay off, and the jackpot payoff is something like 50K-100K. Really Really doesnt make sense unless you enjoy the atmosphere you are not going to get rich as an employee in a start up, even if the start up sells for 500 million. you are going to get back the 30% a year you lost by not going to bigco unless the founders just feel like making everyone rich.
- sharkweek 12y ago
  Good points, but one thing to keep in mind - a lot of people just enjoy working at smaller companies. I did some time at a large financial institution making great money, but absolutely hated how empty it all felt. Nothing got done, nothing changed, nobody listened to me. I work at a much smaller company now, and almost everything I do on a daily basis has a measurable impact. I can literally watch the things me and my team do increase the bottom line. I derive value from this myself, as it allows me to grow my team, hire new employees, give people responsibility of their own, etc.
  - seivan 12y ago
    This would be the main attraction for me as well. What kills me at larger places (and even smaller soul-less companies) is the amount of dead weight and inefficiency. Bullshit work created by people with bullshit titles for bullshit reasons.
  - pm90 12y ago
    I can totally relate. I mean, I've only ever worked for small companies for that very reason. Have you tried working for a big software company instead of a financial institution? I know that banks don't treat software devs all that well, but shops like Google, FB, Rackspace etc. have a pretty good reputation of having a great culture and work environment. Personally, I've only worked for small shops. Nearly all the places I'm currently interviewing are BigCo's though, and I'm not sure how that is going to turn out.
todd8 12y ago
Tivoli Systems, where I worked, went public in 1996. Not long after that it was acquired by IBM (which bought control of the company through a tender offer for the shares). 26 or 27 of the original employees of the company made over one million dollars. Even the administrative assistant, hired in the early years, was able to pay off her house.
- johnward 12y ago
  Same buyer didn't work out as well for us
dsirijus 12y ago
Ask HN: So, I'm the sole founder here with investor. The dude's awesome, but the contract we signed puts me in significant financial risk if the company doesn't turn up profitable. I have more than several employees (some of them will probably read this) who I pay regular and competitive money though I'm not particulary pleased with their output (but hey, it's improving, and there's not much of a talent pool here). Most work on their hourlies, and if milestones/deadlines are not met, I try to find somebody else and handle all the consequences of that myself. Basically, I handle entire risk and stress. Now, if what we work on turns profitable, or has a successful exit or whatnot, you know how much of that money do I think it's fair to give to them? Nada. Zilch. Zero. Go through the shit I'm going through yourself if you want a big payout and then we'll talk. What do you think?
- cm2012 12y ago
  If you really think your employees will read this and know that you wrote this, you should probably delete this or reword this. Its bad for morale to appear flippant about employees.
  - dsirijus 12y ago
    The more I push the line of "I don't care what others think about me" to its absolute, the happier I am as a person. That does not neccesarily mean me earning more money or having a better team morale.
    - unchocked 12y ago
      Your attitude is probably pretty standard fare for business overall. That said, you're probably going to continue to have the same problems that business overall has these days; detached employees, mediocre performance, and a generally escalating bitterness that the world does not love you as much as you think you love yourself. Have fun with that.
    - zenogais 12y ago
      Read: "I'm not good with people. So instead I'm pretend not to car so I don't have to confront that fact as often"
wuliwong 12y ago
When I joined a startup a couple years ago as a very early employee. The equity they offered was some tiny percentage, like 0.1%. I did the math and said, "you know, we would need to exit for a billion dollars for me to receive a million?" The founder seemed surprised at that. Nevertheless, I joined the startup. What I don't understand is if the company does sell, and I only get my 0.1%, I should be upset or call the founder "greedy" if he doesn't give me more money than what was in my contract? If I'm going to take less than what I believe to be the "market rate" for my services in lieu of some equity and my motivation is to make money, then I'm going to do the math and weigh the probabilities of my equity and the lower-than-market salary being more lucrative than taking a job with no equity and a market rate salary. I just don't see how founders who honor contracts that employees sign as being greedy. Arguments that the founders take more risk or work harder or whatever seems to me to be beside the point. If the employee doesn't think the percentage of equity is good, then they shouldn't sign the contract. That's how I see it. And maybe if more of us took that stance we wouldn't have to hope that founders would just give us money out of the goodness of their hearts and instead have satisfactory agreements already in writing.
- chermanowicz 12y ago
  I agree here to some extent, but there are a lot of ways companies can exit with employees receiving less than their equitable share of the company's acquisition price/value. Ex. Salary & retention package for founders & certain execs while common stock purchase price is drastically reduced. (just one example)
- timr 12y ago
  "you know, we would need to exit for a billion dollars for me to receive a million?" It's worse than that. By the time you factor in preferred shares and other investment dilution, your 0.1% will be more like 0.00001%[+]. Few people think about that, and unless someone is actively looking out for your interests (e.g. someone giving retention grants -- or you demanding them), it's difficult to make a lot of money as an early startup employee. You can easily find yourself in a situation where you vest your grant, leave the company, and later find out that a new hire is making an order of magnitude more money than you in an exit. That's startup life. The game here is predicting the expected value of an extremely improbable future event, and sacrificing present day money in favor of that event. There's no "fair" way to do it, so if a founder is asking that kind of commitment of you, they should be looking out for your interests over the long term as well. [+] edit: I overstated my case here. You can probably expect 1-2 orders of magnitude dilution, but it doesn't really change the argument.
wellboy 12y ago
Awesome, this is how it´s done. Finally some real founders start to be out there!
lazyjones 12y ago
Misleading title IMO. None of these CEOs gave up their fortunes, they just shared a (small) part with their employees.
god_bless_texas 12y ago
I feel stupid. What is "signaling"?
- mareofnight 12y ago
  Basic meaning: doing a thing to send a message about yourself to others. Like wearing expensive brands to signal that you're rich. But good signalling involves some additional factors. Signalling is usually used when you want to say something about yourself, but it's something that people would want to say about themselves whether it was true or not, so you have to say it in a way that is difficult or impossible to fake. A good signal is one that is highly visible (in the context where it matters; clothes are good for in-person signaling, profiles or photos are good for online signaling), and either cannot be sent without having the quality they're supposed to signify (you can't afford expensive things to show off if you don't have money), or are much easier to send if you have that quality than if you don't (it's easier to get a high StackOverflow score if you're good at programming and communicating than if you're not). If you're giving employees extra stock to signal loyalty and trustworthiness, it's "cheaper" to do that if you actually value being loyal and trustworthy (rather than just wanting others to think that of you), because then you get value from being the sort of person you want to be and being thought well of by others. At least, that's the theory; you could just want other people to think you're a loyal person really, really badly.
EGreg 12y ago
Someone should mention Steve Wozniak here
yeukhon 12y ago
I think (still looking for opportunity in a startup) if I had to choose, I choose a startup based on (1) the missions (2) the investors (3) founder(s) history and attitudes equity is always a nice thing honestly there are startups that will never go IPO and there are the ones that will fail in a year or two, and there are ones that will go on for a very long time and held privately by founders and there are ones that will be acquired within a few years. The chances are, before your company is sold, you might be looking for another job already. Also, read the equity/stock agreement CAREFULLY before you sign one and understand what you are signing up for.
gkmoyn 12y ago
It'd be great if instead of founders generously giving to employees post-facto, startup contracts were more employee-friendly from the beginning. How much % should engineers 1-10 demand? One percent is typical for eng #1. On day one, with no code written, where the founders depend entirely on the engineers, where it's just an idea and investor money, they're only a hundredth of the value of the company.
deleted 12y ago
[deleted]
alexweberk 12y ago
It comes down to trust, really. What goes around comes around.

230 points by whyleym 12y ago

kjs3 12y ago

They gave up some money to reward valuable employees. That's not, per se, being magnanimous or generous, it's being smart businessmen. All of these founders made out just fine, financially. When they start their next big thing, they'll be remembered not only as the guys who had a successful exit, they'll be remembered as the guys took care of their people along the way. That's about the smartest way to recruit top talent you can come up with.

teej 12y ago
I don't think you are giving these founders enough credit. Startup acquisitions, not unlike fundraising, can be very emotional. Acquirers can go from hot to cold very quickly if they hear the wrong thing or get the wrong vibe. The founders went to great lengths to structure the deal in a way that compensated their employees like this. It's likely that they put the entire deal at risk to do so. That, in my mind, strongly shows generosity on the part of the founder.
- kjs3 12y ago
  per se: by or in itself or themselves; intrinsically. I understand that some (most) of these guys are, in fact, doing this because it's the right thing to do and they are, in fact, that invested. I merely wanted to point out, counter to the tone and implication of the article, that's not the only reason to do this and they were still handsomely rewarded for the risk they took. Conversely, I want to point out to anyone who thinks not doing the right thing wrt your team so you can pocket a few extra percentage points can have a negative consequence.
  - jacquesm 12y ago
    Sure they're smart businessmen (and women), they built awesome companies and successfully negotiated substantial exits. If they weren't smart then neither of those would have happened in the first place! But in the article there are some very good examples of situations where most C level teams and founders would have happily made off with the loot without sharing any of it with their co-workers, as one CEO in the article put it 'the ones they went to war with'. And there would be nothing or nobody to stop that from happening, and because this is 'normal' nobody would have likely even said anything about it beyond some grumbling at the watercooler and a maybe slightly higher turnover directly post acquisition. So I read their generosity as the first driver to do this, and that there maybe is another reason is possible but I've yet to see a repeat successful team which would allow the conclusion to be that the second reason is also a motivator. They're doing good, and good by their people, and that's about it. No need to search for an ulterior motive. And there are very few if any negative consequences to not doing 'the right thing' with respect to your team, because that - unfortunately - is business as usual. These are the exceptions, definitely not the rule. I hope it becomes more common though.
- nilkn 12y ago
  I definitely agree with you, but I also like a term from the article: the founders were long-term greedy rather than short-term greedy. They were willing to give millions to their employees in exchange for what I can only assume to be life-long loyalty and an unbeatable reputation. For someone who wants to stay in the industry for the next 10-20 years and found more companies, that could very well end up being worth far more than the money given up in the deal to employees.
- curun1r 12y ago
  FWIW, one of the founders in the article phrased it as being "long-term greedy." I'm sure it felt good to make millionaires out of employees (having been part of an acquisition where only ~10 people out of nearly 300 became millionaires, I can only imagine the parties we would have had if the majority of the people had gotten life-changing exits), but there was definitely an awareness of the long-term benefits among the founders in question.
jacquesm 12y ago
That's a pretty cynical worldview. If a founder doesn't have to share his wealth because of a bunch of paper and decides to do it anyway that is generous first and possibly good business second. After all there is no obligation on his part to ever do another start-up, there is no obligation on those rewarded to join in the future and the incidence of 'repeat teams' is low enough that I don't think it is a factor at all.
- kjs3 12y ago
  Wait...I'm cynical?
baddox 12y ago
> That's not, per se, being magnanimous or generous, it's being smart businessmen. It's being both.
kelukelugames 12y ago
I think this is generous but it really should be the norm. People who join start ups suffer a huge opportunity cost--hundreds of thousands of dollars in RSUs

erobbins 12y ago

It's sad that this behavior is unusual enough to be noteworthy.

vinceguidry 12y ago
This comment reads as entitled to me. Startup founders have an insane number of things on their plate, and that list just keeps growing and growing. Startup employees work hard, but the founders still bear most of the risk and responsibility. What really needs to happen is for new ways to organize startups to distribute the risks and responsibilities better, so that it's not up to the goodness of the founder's heart to ensure a good outcome for the employees. Of course, this implies that the pie is being made bigger, the risks and responsibilities being spread out are actually building more value in the company so as to generate a bigger exit. So far though founder-level discipline and risk-taking is rare enough in one individual that this is the situation we have to deal with.
- x0x0 12y ago
  And great employees can always go to {google, fb, twitter, microsoft, salesforce, etc} and get paid $250-$300 / year in cash or cash equivalents, instead of $125-$150 plus lottery tickets. In fact, I remember reading that round A is the worse time for an employee to join a startup: the large grants are gone, but the business isn't derisked, so your lottery tickets still have shit ev.
  - JimboOmega 12y ago
    Is the going rate $250-$300k these days? Honestly, though - beyond just larger equity grants, I'd like to see companies have people get rewarded when the company does well... Through some kind of bonus (in equity or cash). It seems like most companies either have bonuses that are pretty much an expected part of salary, or they have no bonus in any situation. I've only really been part of the latter, though.
    - x0x0 12y ago

clamprecht 12y ago

The article says: > There’s a startup in New York everyone talks about, and the things they say aren't very nice. The startup sold for ~ $80 million and the founders got rich. But, as the rumors go, no other employee made more than $50,000. Does anyone know which startup they are referring to? carrentals.com? something else?

georgemcbay 12y ago
Hunch fits the location and approximate acquisition price, but I can't speak to how screwed over the non-founders were (or weren't). Not sure that "everyone talks about" it (though that applies even more so for carrentals.com, IMO). Maybe they meant "everyone in NYC talks about it".
- taylorbuley 12y ago
  With Chris Dixon being praised in the piece, I have trouble believing the writer had Hunch in mind.
  - georgemcbay 12y ago
    Good point! You're probably right.
x0x0 12y ago
digg seems to be famous for doing well by Kevin Rose and not by anyone else. It happens out in the valley too.
jlintz 12y ago
Sounds like GroupMe, sold for 80 mill and was around a year old at the time
gyardley 12y ago
'Everyone' isn't talking about this issue, so everyone's guess is just a guess. That said, Invite Media was acquired by Google for $81MM a couple years back.

abat 12y ago

Do employee stock options usually not vest automatically upon acquisition? The SinglePlatform story made it sound like employees get screwed if there's an early exit before their options had fully vested.

jacquesm 12y ago
That very much depends on the contract. I have said this before and I'll repeat it on the off chance that it will save someone's bacon one day: insist on accelerated vesting clauses in change of control situations.
- ashbrahma 12y ago
  Is it easy to negotiate a change or add an acceleration clause in the options grant? Seems like those docs are set in stone and very hard to change without board approvals etc.
  - jacquesm 12y ago
    Then you go somewhere else. Nobody forces you to take a job with extra risks and a contractual situation that allows others to pull the rug out from under you when the pay-off materializes. Really, the only potentially bad contracts are the ones that you've signed. So as long as you haven't signed you have negotiation room and if your choice is between being paid 'market rates' versus being paid 'half of market rate + options' and those options are subject to change without notice then you're just setting yourself up for being hurt if you chose the second. Nothing is set in stone, that's more a matter of self-confidence and knowing when to walk away.
  - kijiki 12y ago
    The grant itself requires board approval, so that isn't a huge roadblock. The bigger issue is how much leverage you have. If you're experienced and they need you, getting double-trigger acceleration shouldn't be an issue, and it can't hurt to at least ask for single-trigger...
aidenn0 12y ago

peter303 12y ago

Steve Wozniak for one. Steve Jobs wouldnt share his Apple stock with anyone. He repeated this with Pixar. In the 1980s a decent IPO would be about $100K for workers. It would go towards a home down payment.

vishalzone2002 12y ago

are there any such pre-exit companies out there?

Arjuna 12y ago

Although Woz wasn't a CEO... for those that don't know about this, I thought you would find it interesting [1]: "And when Jobs (in the movie, but really a board does this) denied stock to the early garage team (some not even shown) I'm surprised that they chose not to show me giving about $10M of my own stock to them because it was the right thing. And $10M was a lot in that time." [1] Woz's entire post is on this page: https://plus.google.com/+CarmsPerez/posts/GnVTvQNgvpf https://plus.google.com/+CarmsPerez/posts/GnVTvQNgvpf

soperj 12y ago
I truly hope that Woz is remembered as the guy behind Apple's early greatness and Jobs as just a dickhead who set us all back. Not just developers with his no compete bullshit, but everyone with his stupid no ports aesthetic. How are people supposed to learn to tinker when everything is locked down??
- Ricapar 12y ago
  By his logic: Why would you want to tinker with something that's already perfect?
- cjslep 12y ago
  I believe it was Steve Kent's The Ultimate History of Video Games Atari portion that really fleshes out Steve Jobs. The two anecdotes I remember are: 1. People in Atari generally considering him an oderous hairy hippie who once disappeared from work to go to India for self-enlightenment, but returned with Hepatitis. 2. He (Steve) was once offered $100 per transistor he could eliminate below the 100-transistor mark for an arcade game (I believe it was mid 150 count at the time), so he went to Woz and paid him on the order of $100 to eliminate the transistors (Woz was woefully unaware of the deal between Steve and Atari). Woz got it down in the low 30's or high 20's, Steve got the large sum of money and Atari wound up adding transistors back because while it worked they couldn't figure out how.
  - Cyph0n 12y ago
    Holy shit. ~30 transistors make a game? Woz was a genius.

discardorama 12y ago

Beyond a certain amount of money (I'll throw out a number and say, $10M), the incremental gain is not much. The change in your lifestyle in going from $0M to $5M is huge; but from $10M to $15M? Not much. So these CEOs are doing the smart thing (in addition to the nice thing). They know that when they get the inevitable itch to do the next startup, they can count on a stellar reputation and recruit some great talent.

autism_hurts 12y ago
I think a game changer cash position for most people is 2.5MM liquid -- not tied up in real estate. 5MM means you're flying business/first with your family anytime/anywhere. You may have a pied a terre somewhere. 10MM means you're angel investing, vacationing, and not generally "working" anymore. 15M++ means you bank with The Private Bank of Wells Fargo, have a ridiculous line of credit // no checking account, multiple properties, trust, etc.
- refurb 12y ago
  $5M doesn't go that far anymore. If you're young and you have $5M, you could take 4-5% per year and make it last 40-50 years. That's only $250,000 per year, pre tax. Good money, but certainly not enough to not have to think about money anymore.
  - mikeyouse 12y ago
    Your $5M liquid would be earning interest the entire time too. With that much money, it'd be 'easy' to make 4% - 5%/year, so you could live on $250k/year and never touch the principle.
    - refurb 12y ago
      That was my point. A good rule of thumb is that you can pull 3-4% out of a investment each year and you will never run out. Increase that to 4-5% and it should last your entire life. Don't get me wrong, $250K per year pre-tax is a very comfortable lifestyle. However, it's not so much money that you can spend without thought.

apalmer 12y ago

I dont think startup CEOs have any requirement to do this type of thing. On the other hand I think there is a powerful reality distortion field around start ups. Its literally more work than at bigco, for about 70% of the salary, for a lotto ticket that has a 1 in 1000 chance of pay off, and the jackpot payoff is something like 50K-100K. Really Really doesnt make sense unless you enjoy the atmosphere you are not going to get rich as an employee in a start up, even if the start up sells for 500 million. you are going to get back the 30% a year you lost by not going to bigco unless the founders just feel like making everyone rich.

sharkweek 12y ago
Good points, but one thing to keep in mind - a lot of people just enjoy working at smaller companies. I did some time at a large financial institution making great money, but absolutely hated how empty it all felt. Nothing got done, nothing changed, nobody listened to me. I work at a much smaller company now, and almost everything I do on a daily basis has a measurable impact. I can literally watch the things me and my team do increase the bottom line. I derive value from this myself, as it allows me to grow my team, hire new employees, give people responsibility of their own, etc.
- seivan 12y ago
  This would be the main attraction for me as well. What kills me at larger places (and even smaller soul-less companies) is the amount of dead weight and inefficiency. Bullshit work created by people with bullshit titles for bullshit reasons.
- pm90 12y ago
  I can totally relate. I mean, I've only ever worked for small companies for that very reason. Have you tried working for a big software company instead of a financial institution? I know that banks don't treat software devs all that well, but shops like Google, FB, Rackspace etc. have a pretty good reputation of having a great culture and work environment. Personally, I've only worked for small shops. Nearly all the places I'm currently interviewing are BigCo's though, and I'm not sure how that is going to turn out.

todd8 12y ago

Tivoli Systems, where I worked, went public in 1996. Not long after that it was acquired by IBM (which bought control of the company through a tender offer for the shares). 26 or 27 of the original employees of the company made over one million dollars. Even the administrative assistant, hired in the early years, was able to pay off her house.

johnward 12y ago
Same buyer didn't work out as well for us

dsirijus 12y ago

Ask HN: So, I'm the sole founder here with investor. The dude's awesome, but the contract we signed puts me in significant financial risk if the company doesn't turn up profitable. I have more than several employees (some of them will probably read this) who I pay regular and competitive money though I'm not particulary pleased with their output (but hey, it's improving, and there's not much of a talent pool here). Most work on their hourlies, and if milestones/deadlines are not met, I try to find somebody else and handle all the consequences of that myself. Basically, I handle entire risk and stress. Now, if what we work on turns profitable, or has a successful exit or whatnot, you know how much of that money do I think it's fair to give to them? Nada. Zilch. Zero. Go through the shit I'm going through yourself if you want a big payout and then we'll talk. What do you think?

cm2012 12y ago
If you really think your employees will read this and know that you wrote this, you should probably delete this or reword this. Its bad for morale to appear flippant about employees.
- dsirijus 12y ago
  The more I push the line of "I don't care what others think about me" to its absolute, the happier I am as a person. That does not neccesarily mean me earning more money or having a better team morale.
  - unchocked 12y ago
    Your attitude is probably pretty standard fare for business overall. That said, you're probably going to continue to have the same problems that business overall has these days; detached employees, mediocre performance, and a generally escalating bitterness that the world does not love you as much as you think you love yourself. Have fun with that.
  - zenogais 12y ago
    Read: "I'm not good with people. So instead I'm pretend not to car so I don't have to confront that fact as often"

wuliwong 12y ago

When I joined a startup a couple years ago as a very early employee. The equity they offered was some tiny percentage, like 0.1%. I did the math and said, "you know, we would need to exit for a billion dollars for me to receive a million?" The founder seemed surprised at that. Nevertheless, I joined the startup. What I don't understand is if the company does sell, and I only get my 0.1%, I should be upset or call the founder "greedy" if he doesn't give me more money than what was in my contract? If I'm going to take less than what I believe to be the "market rate" for my services in lieu of some equity and my motivation is to make money, then I'm going to do the math and weigh the probabilities of my equity and the lower-than-market salary being more lucrative than taking a job with no equity and a market rate salary. I just don't see how founders who honor contracts that employees sign as being greedy. Arguments that the founders take more risk or work harder or whatever seems to me to be beside the point. If the employee doesn't think the percentage of equity is good, then they shouldn't sign the contract. That's how I see it. And maybe if more of us took that stance we wouldn't have to hope that founders would just give us money out of the goodness of their hearts and instead have satisfactory agreements already in writing.

chermanowicz 12y ago
I agree here to some extent, but there are a lot of ways companies can exit with employees receiving less than their equitable share of the company's acquisition price/value. Ex. Salary & retention package for founders & certain execs while common stock purchase price is drastically reduced. (just one example)
timr 12y ago
"you know, we would need to exit for a billion dollars for me to receive a million?" It's worse than that. By the time you factor in preferred shares and other investment dilution, your 0.1% will be more like 0.00001%[+]. Few people think about that, and unless someone is actively looking out for your interests (e.g. someone giving retention grants -- or you demanding them), it's difficult to make a lot of money as an early startup employee. You can easily find yourself in a situation where you vest your grant, leave the company, and later find out that a new hire is making an order of magnitude more money than you in an exit. That's startup life. The game here is predicting the expected value of an extremely improbable future event, and sacrificing present day money in favor of that event. There's no "fair" way to do it, so if a founder is asking that kind of commitment of you, they should be looking out for your interests over the long term as well. [+] edit: I overstated my case here. You can probably expect 1-2 orders of magnitude dilution, but it doesn't really change the argument.

wellboy 12y ago

Awesome, this is how it´s done. Finally some real founders start to be out there!

lazyjones 12y ago

Misleading title IMO. None of these CEOs gave up their fortunes, they just shared a (small) part with their employees.

god_bless_texas 12y ago

I feel stupid. What is "signaling"?

mareofnight 12y ago
Basic meaning: doing a thing to send a message about yourself to others. Like wearing expensive brands to signal that you're rich. But good signalling involves some additional factors. Signalling is usually used when you want to say something about yourself, but it's something that people would want to say about themselves whether it was true or not, so you have to say it in a way that is difficult or impossible to fake. A good signal is one that is highly visible (in the context where it matters; clothes are good for in-person signaling, profiles or photos are good for online signaling), and either cannot be sent without having the quality they're supposed to signify (you can't afford expensive things to show off if you don't have money), or are much easier to send if you have that quality than if you don't (it's easier to get a high StackOverflow score if you're good at programming and communicating than if you're not). If you're giving employees extra stock to signal loyalty and trustworthiness, it's "cheaper" to do that if you actually value being loyal and trustworthy (rather than just wanting others to think that of you), because then you get value from being the sort of person you want to be and being thought well of by others. At least, that's the theory; you could just want other people to think you're a loyal person really, really badly.

EGreg 12y ago

Someone should mention Steve Wozniak here

yeukhon 12y ago

I think (still looking for opportunity in a startup) if I had to choose, I choose a startup based on (1) the missions (2) the investors (3) founder(s) history and attitudes equity is always a nice thing honestly there are startups that will never go IPO and there are the ones that will fail in a year or two, and there are ones that will go on for a very long time and held privately by founders and there are ones that will be acquired within a few years. The chances are, before your company is sold, you might be looking for another job already. Also, read the equity/stock agreement CAREFULLY before you sign one and understand what you are signing up for.

gkmoyn 12y ago

It'd be great if instead of founders generously giving to employees post-facto, startup contracts were more employee-friendly from the beginning. How much % should engineers 1-10 demand? One percent is typical for eng #1. On day one, with no code written, where the founders depend entirely on the engineers, where it's just an idea and investor money, they're only a hundredth of the value of the company.

deleted 12y ago

[deleted]

alexweberk 12y ago

It comes down to trust, really. What goes around comes around.