11 ms·

Apple event overshadows unflattering news at Snapchat, Tinder

420 points by wmt 12y ago

downandout 12y ago
As a co-founder who got screwed on a large acquisition, it makes me happy to see that Snapchat finally settled. However, a settlement doesn't change the fact that Evan Spiegel really went out of his way to intentionally screw the guy that actually invented Snapchat's model - and seemed to enjoy doing it. He's definitely not someone I'd ever do business with. http://www.businessinsider.com/snapchat-lawsuit-video-depositions-2013-11 http://www.businessinsider.com/snapchat-lawsuit-video-deposi...
- deleted 12y ago
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  - jacquesm 12y ago
    That's all totally besides the point. The suit argued that there was a verbal agreement on three equal shares and that the plaintiff was cut out of the deal when the other two co-founders went and created a new company split 60/40 between them. I may be mis-interpreting all this but if that's true then that alone would likely be enough to give him a very credible claim. You receive equity because you have agreed to receive that equity in return for something, whatever that something is. If after that the other party breaks that agreement in some way then you can sue them for breach of contract. If the agreement is only verbal then it will be an uphill battle but in these days of email, text messages and skype an awful lot of that stuff is logged to the point where it could be used to support the existence or non-existence of such a verbal agreement. So whether to you he's 'not even close to being a co-founder' is not important, what mattered is that they apparently agreed that he was a co-founder and would get an equal share in the to be formed company.
- gsibble 12y ago
  What's more frightening to me is how many VCs and other investors who went along with the charade and did not care that this criminal was a representative of them.
  - jacquesm 12y ago
    Investors in general have limited say in what the founders arrange amongst themselves. For all we know the settlement was reached after pressure from investors or maybe the exact opposite happened. I'm an investor in a small company (< 50 employees) that went through a very rough time in the beginning because of co-founder issues and it got resolved mostly because of investors working hard to save the company from going under. You could cynically conclude that that was done to protect our investment (and that might even be the right conclusion). What founders have been up to is not always immediately clear when you invest, sometimes the proverbial skeleton in the cupboard can be hidden quite well. I make a living digging such stuff up so I was fairly well prepared but the degree to which these things can blow up still surprised me.
  - sjtgraham 12y ago
    Whoa, slow your roll. i) this is a civil matter, ii) both parties settled, with probably no admission of any wrongdoing by either party. Throwing around labels such as "criminal" is not something one does lightly. If you're not careful you could be soon facing a civil action of your own for libel.
    - Yourfags 12y ago
      hn was shaking in its boots...
- nailer 12y ago
  From the Businessweek link, Brown seemed to contribute an idea. And that's it. Nothing unique (disappearing photo apps existed before, see the rest of the thread). No programming expertise, he didn't make anything.
  - vladtaltos 12y ago
    read their statement carefully: “We acknowledge Reggie’s contribution to the creation of Snapchat and appreciate his work in getting the application off the ground.” I wouldn't think they'd add a sentence like this to their press release if his only contribution was only an idea.
    - sib 12y ago
      "I wouldn't think they'd add a sentence like this to their press release if his only contribution was only an idea." That's exactly the sort of thing that was likely specified in the settlement agreement itself, probably in exchange for a lower financial cost of settling.
    - nailer 12y ago
      The founders didn't think he had the technical expertise to make the app so they didn't involve him in that. A legal statement, made to placate a litigant does not change that.
      - vladtaltos 12y ago
        nevertheless, he made them to put that sentence into their settlement. good for him.
- stigi 12y ago
  I wonder how such things become possible. As co-founders shouldn't you have a written (and lawyer checked) agreement on how the company is shared amongst you? How can one betray the other besides of letting him/her unknowingly sign an unfortunate contract?
  - jonifico 12y ago
    Projects like that are usually made between friends and aren't really expected to become THAT big. Plus, it doesn't really matter, they took the guy out of the business and took away his rightful part of it. Good thing they settled.
    - sergiotapia 12y ago
      So you're the three of em just had a verbal arrangement and not a signed contract detailing company divisions?
      - at-fates-hands 12y ago
        You can read all the sordid details here: http://www.businessinsider.com/reggie-brown-sues-snapchat-investors-2013-11 http://www.businessinsider.com/reggie-brown-sues-snapchat-in...
        sergiotapia 12y ago
        "At this point, Brown and the Individual Defendants…entered into an explicit oral agreement as to their respective interests in their joint undertaking to develop the Application…That explicit agreement was that their interests in the venture would be equally distributed, i.e. each of them would have 1/3 ownership and profit interests in the joint venture/partnership." Yeah, verbal agreements aren't worth squat. At best, you get a settlement, at worst you get nothing. I'm surprised these guys didn't sign contracts amongst themselves.
        r00fus 12y ago
- mbesto 12y ago
  A few friends of mine saw Evan speak at Stanford this past spring. He was in a room with Eric Schmidt and Sam Altman (IIRC) and his attitude towards them was nothing short of smug. I don't remember the specifics of what he said but my friends said he basically "told Eric, Sam and other prominent VCs on the panel off because he thought he was more successful than them". Take that for what it's worth.
  - cookiecaper 12y ago
    >Take that for what it's worth. Which is nothing. We don't have the context and it's always amazing how people, even just observers with no skin in the game, will have wildly divergent interpretations of the same events. There's definitely some interpretation going on here as Snapchat guy almost assuredly didn't say "I'm more successful than you".
    - mbesto 12y ago
      It was a room full of Stanford students, many of which had zero context of who he was or what his reputation was. They were there to learn from successful VCs/Founders/etc and every student I spoke with generally agreed he was smug, off putting and dismissive not only to the students but also the other panel members. Given it's consistent with the public's perception of how Snapchat operates, I'm simply reinforcing the parent comments sentiment.
    - alelefant 12y ago
      You don't need expertise in a particular profession to come to the conclusion that someone is being smug, rude, etc. If I saw someone on the street being disrespectful, is it unfair for me to come to that conclusion because I don't fully understand their field of work?
      - cookiecaper 12y ago
        I didn't say anything about the field of work, so I'm not sure what you're getting at. We don't have the context of the conversation or panel in which the supposedly dismissive and/or smug comments occurred and we don't have enough information to make our own conclusion on the behavior or the reliability of the assessment given here. There are many reasons someone may feel that a speaker is smug. Some may be warranted and some may not. Since we don't know what happened and can't evaluate whether the parent's friends made a correct assessment or not, with this type of matter, it's best to just ignore it entirely. It has nothing to do with our familiarity with anyone's line of work.
compare 12y ago
Seems a bit comical that the article claims this to be the first disappearing photo app. I created and launched one myself a year before Snapchat started... The normal way for start founders to receive equity, is only from one or more of these 3 things: - For hours worked, based on the vesting and usually the hours must be beyond the cliff or you get nothing. - If you built a crucial part of the IP that the company needs to buy from you with equity. - Cash invested up front - less common. He fulfilled none of those. Not even close to being a cofounder. Ideas aren't included among those.
- jacquesm 12y ago
  Gah I hate it when people delete comments and then repost them elsewhere in the thread. I wrote a longish answer to your comment here: https://news.ycombinator.com/item?id=8295469 https://news.ycombinator.com/item?id=8295469
  - deleted 12y ago
    [deleted]
    - jacquesm 12y ago
      Have you seen their shareholder agreement? Does one even exist? Vesting is quite common in the EU, but only when it is agreed upon by all parties. If you're founding a business on equal equity based on the capital deposited you get those shares up front, any additional shares emitted subject to vesting/shareholder agreements, payments and so on. What you agree on matters, not what you later think you should have agreed on. Anyway, I note the case has been settled and that you either have some hidden knowledge about this case or that your position is at odds with reality as currently on display.
      - deleted 12y ago
        [deleted]
        jacquesm 12y ago
flurdy 12y ago
I was going to link to the mandatory reading of Joel Spolsky's canonical answer on splitting shares in startups between founders and beyond. But as Stack Exchange's policy of shuttering less popular subsites that is now lost in its original form :( It was originally here http://answers.onstartups.com/questions/6949/forming-a-new-software-startup-how-do-i-allocate-ownership-fairly/23326#23326 http://answers.onstartups.com/questions/6949/forming-a-new-s... Is there a good reproduction elsewhere?
- dvdhsu 12y ago
  Found it copied here: http://www.gravitycomputing.co.nz/joels-totally-fair-method-to-divide-up-the-ownership-of-any-startup/ http://www.gravitycomputing.co.nz/joels-totally-fair-method-... """ This is such a common question here and elsewhere that I will attempt to write the world’s most canonical answer to this question. Hopefully in the future when someone on answers.onstartups asks how to split up the ownership of their new company, you can simply point to this answer. The most important principle: Fairness, and the perception of fairness, is much more valuable than owning a large stake. Almost everything that can go wrong in a startup will go wrong, and one of the biggest things that can go wrong is huge, angry, shouting matches between the founders as to who worked harder, who owns more, whose idea was it anyway, etc. That is why I would always rather split a new company 50-50 with a friend than insist on owning 60% because “it was my idea,” or because “I was more experienced” or anything else. Why? Because if I split the company 60-40, the company is going to fail when we argue ourselves to death. And if you just say, “to heck with it, we can NEVER figure out what the correct split is, so let’s just be pals and go 50-50,” you’ll stay friends and the company will survive. Thus, I present you with Joel’s Totally Fair Method to Divide Up The Ownership of Any Startup. For simplicity sake, I’m going to start by assuming that you are not going to raise venture capital and you are not going to have outside investors. Later, I’ll explain how to deal with venture capital, but for now assume no investors. Also for simplicity sake, let’s temporarily assume that the founders all quit their jobs and start working on the new company full time at the same time. Later, I’ll explain how to deal with founders who do not start at the same time. Here’s the principle. As your company grows, you tend to add people in “layers”. The top layer is the first founder or founders. There may be 1, 2, 3, or more of you, but you all start working about the same time, and you all take the same risk… quitting your jobs to go work for a new and unproven company. The second layer is the first real employees. By the time you hire this layer, you’ve got cash coming in from somewhere (investors or customers–doesn’t matter). These people didn’t take as much risk because they got a salary from day one, and honestly, they didn’t start the company, they joined it as a job. The third layer are later employees. By the time they joined the company, it was going pretty well. For many companies, each “layer” will be approximately one year long. By the time your company is big enough to sell to Google or go public or whatever, you probably have about 6 layers: the founders and roughly five layers of employees. Each successive layer is larger. There might be two founders, five early employees in layer 2, 25 employees in layer 3, and 200 employees in layer 4. The later layers took less risk. OK, now here’s how you use that information: The founders should end up with about 50% of the company, total. Each of the next five layers should end up with about 10% of the company, split equally among everyone in the layer. Example: Two founders start the company. They each take 2500 shares. There are 5000 shares outstanding, so each founder owns half. They hire four employees in year one. These four employees each take 250 shares. There are 6000 shares outstanding. They hire another 20 employees in year two. Each one takes 50 shares. They get fewer shares because they took less risk, and they get 50 shares because we’re giving each layer 1000 shares to divide up. By the time the company has six layers, you have given out 10,000 shares. Each founder ends up owning 25%. Each employee layer owns 10% collectively. The earliest employees who took the most risk own the most shares. Make sense? You don’t have to follow this exact formula but the basic idea is that you set up “stripes” of seniority, where the top stripe took the most risk and the bottom stripe took the least, and each “stripe” shares an equal number of shares, which magically gives employees more shares for joining early. A slightly different way to use the stripes is for seniority. Your top stripe is the founders, below that you reserve a whole stripe for the fancy CEO that you recruited who insisted on owning 10%, the stripe below that is for the early employees and also the top managers, etc. However you organize the stripes, it should be simple and clear and easy to understand and not prone to arguments. Now that we have a fair system set out, there is one important principle. You must have vesting.Preferably 4 or 5 years. Nobody earns their shares until they’ve stayed with the company for a year. A good vesting schedule is 25% in the first year, 2% each additional month. Otherwise your co-founder is going to quit after three weeks and show up, 7 years later, claiming he owns 25% of the company. It never makes sense to give anyone equity without vesting. This is an extremely common mistake and it’s terrible when it happens. You have these companies where 3 cofounders have been working day and night for five years, and then you discover there’s some jerk that quit after two weeks and he still thinks he owns 25% of the company for his two weeks of work. Now, let me clear up some little things that often complicate the picture. What happens if you raise an investment? The investment can come from anywhere… an angel, a VC, or someone’s dad. Basically, the answer is simple: the investment just dilutes everyone. Using the example from above… we’re two founders, we gave ourselves 2500 shares each, so we each own 50%, and now we go to a VC and he offers to give us a million dollars in exchange for 1/3rd of the company. 1/3rd of the company is 2500 shares. So you make another 2500 shares and give them to the VC. He owns 1/3rd and you each own 1/3rd. That’s all there is to it. What happens if not all the early employees need to take a salary? A lot of times you have one founder who has a little bit of money saved up, so she decides to go without a salary for a while, while the other founder, who needs the money, takes a salary. It is tempting just to give the founder who went without pay more shares to make up for it. The trouble is that you can never figure out the right amount of shares to give. This is just going to cause conflicts. Don’t resolve these problems with shares.Instead, just keep a ledger of how much you paid each of the founders, and if someone goes without salary, give them an IOU. Later, when you have money, you’ll pay them back in cash. In a few years when the money comes rolling in, or even after the first VC investment, you can pay back each founder so that each founder has taken exactly the same amount of salary from the company. Shouldn’t I get more equity because it was my idea? No. Ideas are pretty much worthless. It is not worth the arguments it would cause to pay someone in equity for an idea. If one of you had the idea but you both quit your jobs and started working at the same time, you should both get the same amount of equity. Working on the company is what causes value, not thinking up some crazy invention in the shower. What if one of the founders doesn’t work full time on the company? Then they’re not a founder. In my book nobody who is not working full time counts as a founder. Anyone who holds on to their day job gets a salary or IOUs, but not equity. If they hang onto that day job until the VC puts in funding and then comes to work for the company full time, they didn’t take nearly as much risk and they deserve to receive equity along with the first layer of employees. What if someone contributes equipment or other valuable goods (patents, domain names, etc) to the company? Great. Pay for that in cash or IOUs, not shares. Figure out the right price for that computer they brought with them, or their clever word-processing patent, and give them an IOU to be paid off when you’re doing well. Trying to buy things with equity at this early stage just creates inequality, arguments, and unfairness. How much should the investors own vs. the founders and employees? That depends on market conditions. Realistically, if the investors end up owning more than 50%, the founders are going to feel like sharecroppers and lose motivation, so good investors don’t get greedy that way. If the company can bootstrap without investors, the founders and employees might end up owning 100% of the company. Interestingly enough, the pressure is pretty strong to keep things balanced between investors and founders/employees; an old rule of thumb was that at IPO time (when you had hired all the employees and raised as much money as you were going to raise) the investors would have 50% and the founders/employees would have 50%, but with hot Internet companies in 2011, investors may end up owning a lot less than 50%. Conclusion There is no one-size-fits-all solution to this problem, but anything you can do to make it simple, transparent, straightforward, and, above-all, fair, will make your company much more likely to be successful. """
tomp 12y ago
Honestly, I don't see either of these as nothing but positive news (for the companies, not necessarily for all the people involved).
- maxbrown 12y ago
  They are probably long-term positive, but in the short-term they both could provoke negative press for the companies.
curiousDog 12y ago
As a side note, is it still wise/advisable to join Snapchat as an engineer? Particularly for Visa candidates whee the risk is higher?
- dkfmn 12y ago
  The value of the company is already so high that much of the upside is removed. You really have to believe in the company as a whole to make that commitment.
  - shawabawa3 12y ago
    > You really have to believe in the company as a whole to make that commitment Or just get a good salary/benefits/etc
    - untog 12y ago
      Somewhere like Google will likely pay better, though.
      - ilikemustard 12y ago
        And would be harder to get a job with, presumably. I would venture that it would be much more difficult, but I'm simply speculating.
- jacquesm 12y ago
  If they pay you enough, sure, why not.
- sunievl 12y ago
  depends on what you want out of the job.. Are you looking to establish yourself as a good engineer? Hoping to make big money? Looking for a good salary, perks etc?
TaoloModisi 12y ago
It's interesting the news on Tinder and Snap Chat came around the same time of Apple’s new iPhones and iWatch release. In fact, it's no coincidence they must have been trying to hide behind the noise.
- deleted 12y ago
  [deleted]
- nl 12y ago
  That's almost exactly what the headline of the article says!?
  - k__ 12y ago
    Maybe he wanted a discussion about, how apple news bury interesting news. Instead of discussion how founders get screwed?
    - deleted 12y ago
      [deleted]
    - nl 12y ago
      Then post something interesting about it I guess. It's pretty clear it happened. Is there anything else to say about it? (Personally, I think the Tinder thing is more outrageous than the Snapchat thing, and it was a bigger drama when it first surfaced.)
      - TaoloModisi 12y ago
        It was smart of them to release bad news at the same time as the apple announcement. Not many have talked about the Tinder Issue and Snapchat’s settlement, as a result.
deleted 12y ago
[deleted]
don_right 12y ago
Interesting-thanks!
crag 12y ago
Money. Greed. It destroys more friendships (and marriages) than anything else. So what's the lesson here? Don't be careless. I don't care what the idea (startup) is - get the details on paper. True, 99% of startups fail, but you don't want to be in that 1% that's making the lawyers rich.
- TallGuyShort 12y ago
  I think the other lesson here is to consciously know when you cross the line away from an amount of money you're willing to walk away from to save the friendship, and be sure that's what you want.
- at-fates-hands 12y ago
  >> Money. Greed. It destroys more friendships (and marriages) than anything else. This a thousand time. My first hard earned rule of thumb? Don't do business with your friends. Lost relationships, bitterness, and great financial loss is never worth it. I got burned really bad and spent the better part of four years trying to get my money back. Since then, it's just something I live by.
  - gonzo 12y ago
    Friends? OK But I've been in business with my spouse for over a decade now.
    - zavulon 12y ago
      That's different. Your spouse's and yours financial interests are most likely aligned - you are both bringing in money to one family, so most likely there are no arguments who gets how much. With friends, you and your friend are competing for the same financial pie.
  - maineldc 12y ago
    I am almost the complete opposite. I only start companies with friends and while there have been some issues, it has served me very well. I think it partly depends on the definition of friend. I don't start companies with acquaintances, I start them with people that I love and respect. When you do that, starting a company becomes a really special endeavor. This is very relevant for me at the moment because I am starting a new company and the person that I am hounding to be the founding CTO is a "newer friend" (we have only known each other for 4 years or so) but I am convinced that we will be a great team. My advice is to start companies to work with people you love vs. trying to make a bunch of money. It's such a great way to "work" and greed will have a hard time breaking that.
dreamweapon 12y ago
A beautiful way of saying, "We're sorry... but not really sorry."
jedanbik 12y ago
How is this Apple's fault? Slapping the big A on the headline seems like a derail at best.
- serge2k 12y ago
  It's not, it's just interesting that the level of media coverage of an Apple event overshadows everything else.
- mikeyouse 12y ago
  Not Apple's fault per se, just the Silicon Valley equivalent of a "Friday Night News Dump" that's common in industry and government.[1] It happened to be Apple this time, but it could have just as easily been a Google acquisition, some new Amazon product, basically anything guaranteed to get most of the attention and press. [1] - http://www.rff.org/Publications/Pages/PublicationDetails.aspx?PublicationID=21671 http://www.rff.org/Publications/Pages/PublicationDetails.asp...
autism_hurts 12y ago
Is there any interest in "this is how I got fucked" at a startup type article, or is it so common that it doesn't matter? I have an experience...
- ma2rten 12y ago
  I think, I would be interested.
- discardorama 12y ago
  > I have an experience... I think we all do! ;-) Back in the day, I was a co-founder in a company, started by my advisor's wife. She called us (me and a colleague) to their house, and promised the two of us 20% ownership (and the remaining 60% she kept). I worked like a dog for about 1.5 years, spending nights and weekends getting it off the ground (the business was website creation and other backend stuff). We managed to get the ear of one of the largest grocery chains in the country, and their VP came over to talk to us. My ideas were the core of the presentation. As soon as it looked like it might take off, she started cutting me out. Then one day, the locks were changed in the office! As her husband was still my advisor, I couldn't do anything but grumble and continue working on my dissertation. A few years later, the company was sold for $30MM.
  - srj 12y ago
    Presumably you have your PhD now? Why not sue today?
    - discardorama 12y ago
      I thought about it after I graduated. The problem is: in the initial years, people ask for recommendations from your advisor; and as a PhD, you are basically tied to your advisor for life (people will always ask: who was your advisor?). After some thought, I decided to give it a rest and move on. I had learnt a valuable (and very pricey) lesson: always take things in writing.
      - 12y ago
snoman 12y ago
After the 3rd mention of Apple before the story intro was completed, in an article that (by all appearances) isn't actually about Apple at all, I decided that this just isn't a news source worth reading.
at-fates-hands 12y ago
Interesting all the outrage about Whitney Wolfe and all the articles about her and sexual harassment and sexism in tech while her case was going on. Now she finally wins her case and its like a blip on the radar? Pretty sad if you ask me.
notastartup 12y ago
From the headline, I thought that Apple had banned those two applications.

420 points by wmt 12y ago

As a co-founder who got screwed on a large acquisition, it makes me happy to see that Snapchat finally settled. However, a settlement doesn't change the fact that Evan Spiegel really went out of his way to intentionally screw the guy that actually invented Snapchat's model - and seemed to enjoy doing it. He's definitely not someone I'd ever do business with. http://www.businessinsider.com/snapchat-lawsuit-video-depositions-2013-11 http://www.businessinsider.com/snapchat-lawsuit-video-deposi...

deleted 12y ago
[deleted]
- jacquesm 12y ago
  That's all totally besides the point. The suit argued that there was a verbal agreement on three equal shares and that the plaintiff was cut out of the deal when the other two co-founders went and created a new company split 60/40 between them. I may be mis-interpreting all this but if that's true then that alone would likely be enough to give him a very credible claim. You receive equity because you have agreed to receive that equity in return for something, whatever that something is. If after that the other party breaks that agreement in some way then you can sue them for breach of contract. If the agreement is only verbal then it will be an uphill battle but in these days of email, text messages and skype an awful lot of that stuff is logged to the point where it could be used to support the existence or non-existence of such a verbal agreement. So whether to you he's 'not even close to being a co-founder' is not important, what mattered is that they apparently agreed that he was a co-founder and would get an equal share in the to be formed company.
gsibble 12y ago
What's more frightening to me is how many VCs and other investors who went along with the charade and did not care that this criminal was a representative of them.
- jacquesm 12y ago
  Investors in general have limited say in what the founders arrange amongst themselves. For all we know the settlement was reached after pressure from investors or maybe the exact opposite happened. I'm an investor in a small company (< 50 employees) that went through a very rough time in the beginning because of co-founder issues and it got resolved mostly because of investors working hard to save the company from going under. You could cynically conclude that that was done to protect our investment (and that might even be the right conclusion). What founders have been up to is not always immediately clear when you invest, sometimes the proverbial skeleton in the cupboard can be hidden quite well. I make a living digging such stuff up so I was fairly well prepared but the degree to which these things can blow up still surprised me.
- sjtgraham 12y ago
  Whoa, slow your roll. i) this is a civil matter, ii) both parties settled, with probably no admission of any wrongdoing by either party. Throwing around labels such as "criminal" is not something one does lightly. If you're not careful you could be soon facing a civil action of your own for libel.
  - Yourfags 12y ago
    hn was shaking in its boots...
nailer 12y ago
From the Businessweek link, Brown seemed to contribute an idea. And that's it. Nothing unique (disappearing photo apps existed before, see the rest of the thread). No programming expertise, he didn't make anything.
- vladtaltos 12y ago
  read their statement carefully: “We acknowledge Reggie’s contribution to the creation of Snapchat and appreciate his work in getting the application off the ground.” I wouldn't think they'd add a sentence like this to their press release if his only contribution was only an idea.
  - sib 12y ago
    "I wouldn't think they'd add a sentence like this to their press release if his only contribution was only an idea." That's exactly the sort of thing that was likely specified in the settlement agreement itself, probably in exchange for a lower financial cost of settling.
  - nailer 12y ago
    The founders didn't think he had the technical expertise to make the app so they didn't involve him in that. A legal statement, made to placate a litigant does not change that.
    - vladtaltos 12y ago
      nevertheless, he made them to put that sentence into their settlement. good for him.
stigi 12y ago
I wonder how such things become possible. As co-founders shouldn't you have a written (and lawyer checked) agreement on how the company is shared amongst you? How can one betray the other besides of letting him/her unknowingly sign an unfortunate contract?
- jonifico 12y ago
  Projects like that are usually made between friends and aren't really expected to become THAT big. Plus, it doesn't really matter, they took the guy out of the business and took away his rightful part of it. Good thing they settled.
  - sergiotapia 12y ago
    So you're the three of em just had a verbal arrangement and not a signed contract detailing company divisions?
    - at-fates-hands 12y ago
      You can read all the sordid details here: http://www.businessinsider.com/reggie-brown-sues-snapchat-investors-2013-11 http://www.businessinsider.com/reggie-brown-sues-snapchat-in...
      - sergiotapia 12y ago
        "At this point, Brown and the Individual Defendants…entered into an explicit oral agreement as to their respective interests in their joint undertaking to develop the Application…That explicit agreement was that their interests in the venture would be equally distributed, i.e. each of them would have 1/3 ownership and profit interests in the joint venture/partnership." Yeah, verbal agreements aren't worth squat. At best, you get a settlement, at worst you get nothing. I'm surprised these guys didn't sign contracts amongst themselves.
        r00fus 12y ago
mbesto 12y ago
A few friends of mine saw Evan speak at Stanford this past spring. He was in a room with Eric Schmidt and Sam Altman (IIRC) and his attitude towards them was nothing short of smug. I don't remember the specifics of what he said but my friends said he basically "told Eric, Sam and other prominent VCs on the panel off because he thought he was more successful than them". Take that for what it's worth.
- cookiecaper 12y ago
  >Take that for what it's worth. Which is nothing. We don't have the context and it's always amazing how people, even just observers with no skin in the game, will have wildly divergent interpretations of the same events. There's definitely some interpretation going on here as Snapchat guy almost assuredly didn't say "I'm more successful than you".
  - mbesto 12y ago
    It was a room full of Stanford students, many of which had zero context of who he was or what his reputation was. They were there to learn from successful VCs/Founders/etc and every student I spoke with generally agreed he was smug, off putting and dismissive not only to the students but also the other panel members. Given it's consistent with the public's perception of how Snapchat operates, I'm simply reinforcing the parent comments sentiment.
  - alelefant 12y ago
    You don't need expertise in a particular profession to come to the conclusion that someone is being smug, rude, etc. If I saw someone on the street being disrespectful, is it unfair for me to come to that conclusion because I don't fully understand their field of work?
    - cookiecaper 12y ago
      I didn't say anything about the field of work, so I'm not sure what you're getting at. We don't have the context of the conversation or panel in which the supposedly dismissive and/or smug comments occurred and we don't have enough information to make our own conclusion on the behavior or the reliability of the assessment given here. There are many reasons someone may feel that a speaker is smug. Some may be warranted and some may not. Since we don't know what happened and can't evaluate whether the parent's friends made a correct assessment or not, with this type of matter, it's best to just ignore it entirely. It has nothing to do with our familiarity with anyone's line of work.

compare 12y ago

Seems a bit comical that the article claims this to be the first disappearing photo app. I created and launched one myself a year before Snapchat started... The normal way for start founders to receive equity, is only from one or more of these 3 things: - For hours worked, based on the vesting and usually the hours must be beyond the cliff or you get nothing. - If you built a crucial part of the IP that the company needs to buy from you with equity. - Cash invested up front - less common. He fulfilled none of those. Not even close to being a cofounder. Ideas aren't included among those.

jacquesm 12y ago
Gah I hate it when people delete comments and then repost them elsewhere in the thread. I wrote a longish answer to your comment here: https://news.ycombinator.com/item?id=8295469 https://news.ycombinator.com/item?id=8295469
- deleted 12y ago
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  - jacquesm 12y ago
    Have you seen their shareholder agreement? Does one even exist? Vesting is quite common in the EU, but only when it is agreed upon by all parties. If you're founding a business on equal equity based on the capital deposited you get those shares up front, any additional shares emitted subject to vesting/shareholder agreements, payments and so on. What you agree on matters, not what you later think you should have agreed on. Anyway, I note the case has been settled and that you either have some hidden knowledge about this case or that your position is at odds with reality as currently on display.
    - deleted 12y ago
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      - jacquesm 12y ago

flurdy 12y ago

I was going to link to the mandatory reading of Joel Spolsky's canonical answer on splitting shares in startups between founders and beyond. But as Stack Exchange's policy of shuttering less popular subsites that is now lost in its original form :( It was originally here http://answers.onstartups.com/questions/6949/forming-a-new-software-startup-how-do-i-allocate-ownership-fairly/23326#23326 http://answers.onstartups.com/questions/6949/forming-a-new-s... Is there a good reproduction elsewhere?

dvdhsu 12y ago
Found it copied here: http://www.gravitycomputing.co.nz/joels-totally-fair-method-to-divide-up-the-ownership-of-any-startup/ http://www.gravitycomputing.co.nz/joels-totally-fair-method-... """ This is such a common question here and elsewhere that I will attempt to write the world’s most canonical answer to this question. Hopefully in the future when someone on answers.onstartups asks how to split up the ownership of their new company, you can simply point to this answer. The most important principle: Fairness, and the perception of fairness, is much more valuable than owning a large stake. Almost everything that can go wrong in a startup will go wrong, and one of the biggest things that can go wrong is huge, angry, shouting matches between the founders as to who worked harder, who owns more, whose idea was it anyway, etc. That is why I would always rather split a new company 50-50 with a friend than insist on owning 60% because “it was my idea,” or because “I was more experienced” or anything else. Why? Because if I split the company 60-40, the company is going to fail when we argue ourselves to death. And if you just say, “to heck with it, we can NEVER figure out what the correct split is, so let’s just be pals and go 50-50,” you’ll stay friends and the company will survive. Thus, I present you with Joel’s Totally Fair Method to Divide Up The Ownership of Any Startup. For simplicity sake, I’m going to start by assuming that you are not going to raise venture capital and you are not going to have outside investors. Later, I’ll explain how to deal with venture capital, but for now assume no investors. Also for simplicity sake, let’s temporarily assume that the founders all quit their jobs and start working on the new company full time at the same time. Later, I’ll explain how to deal with founders who do not start at the same time. Here’s the principle. As your company grows, you tend to add people in “layers”. The top layer is the first founder or founders. There may be 1, 2, 3, or more of you, but you all start working about the same time, and you all take the same risk… quitting your jobs to go work for a new and unproven company. The second layer is the first real employees. By the time you hire this layer, you’ve got cash coming in from somewhere (investors or customers–doesn’t matter). These people didn’t take as much risk because they got a salary from day one, and honestly, they didn’t start the company, they joined it as a job. The third layer are later employees. By the time they joined the company, it was going pretty well. For many companies, each “layer” will be approximately one year long. By the time your company is big enough to sell to Google or go public or whatever, you probably have about 6 layers: the founders and roughly five layers of employees. Each successive layer is larger. There might be two founders, five early employees in layer 2, 25 employees in layer 3, and 200 employees in layer 4. The later layers took less risk. OK, now here’s how you use that information: The founders should end up with about 50% of the company, total. Each of the next five layers should end up with about 10% of the company, split equally among everyone in the layer. Example: Two founders start the company. They each take 2500 shares. There are 5000 shares outstanding, so each founder owns half. They hire four employees in year one. These four employees each take 250 shares. There are 6000 shares outstanding. They hire another 20 employees in year two. Each one takes 50 shares. They get fewer shares because they took less risk, and they get 50 shares because we’re giving each layer 1000 shares to divide up. By the time the company has six layers, you have given out 10,000 shares. Each founder ends up owning 25%. Each employee layer owns 10% collectively. The earliest employees who took the most risk own the most shares. Make sense? You don’t have to follow this exact formula but the basic idea is that you set up “stripes” of seniority, where the top stripe took the most risk and the bottom stripe took the least, and each “stripe” shares an equal number of shares, which magically gives employees more shares for joining early. A slightly different way to use the stripes is for seniority. Your top stripe is the founders, below that you reserve a whole stripe for the fancy CEO that you recruited who insisted on owning 10%, the stripe below that is for the early employees and also the top managers, etc. However you organize the stripes, it should be simple and clear and easy to understand and not prone to arguments. Now that we have a fair system set out, there is one important principle. You must have vesting.Preferably 4 or 5 years. Nobody earns their shares until they’ve stayed with the company for a year. A good vesting schedule is 25% in the first year, 2% each additional month. Otherwise your co-founder is going to quit after three weeks and show up, 7 years later, claiming he owns 25% of the company. It never makes sense to give anyone equity without vesting. This is an extremely common mistake and it’s terrible when it happens. You have these companies where 3 cofounders have been working day and night for five years, and then you discover there’s some jerk that quit after two weeks and he still thinks he owns 25% of the company for his two weeks of work. Now, let me clear up some little things that often complicate the picture. What happens if you raise an investment? The investment can come from anywhere… an angel, a VC, or someone’s dad. Basically, the answer is simple: the investment just dilutes everyone. Using the example from above… we’re two founders, we gave ourselves 2500 shares each, so we each own 50%, and now we go to a VC and he offers to give us a million dollars in exchange for 1/3rd of the company. 1/3rd of the company is 2500 shares. So you make another 2500 shares and give them to the VC. He owns 1/3rd and you each own 1/3rd. That’s all there is to it. What happens if not all the early employees need to take a salary? A lot of times you have one founder who has a little bit of money saved up, so she decides to go without a salary for a while, while the other founder, who needs the money, takes a salary. It is tempting just to give the founder who went without pay more shares to make up for it. The trouble is that you can never figure out the right amount of shares to give. This is just going to cause conflicts. Don’t resolve these problems with shares.Instead, just keep a ledger of how much you paid each of the founders, and if someone goes without salary, give them an IOU. Later, when you have money, you’ll pay them back in cash. In a few years when the money comes rolling in, or even after the first VC investment, you can pay back each founder so that each founder has taken exactly the same amount of salary from the company. Shouldn’t I get more equity because it was my idea? No. Ideas are pretty much worthless. It is not worth the arguments it would cause to pay someone in equity for an idea. If one of you had the idea but you both quit your jobs and started working at the same time, you should both get the same amount of equity. Working on the company is what causes value, not thinking up some crazy invention in the shower. What if one of the founders doesn’t work full time on the company? Then they’re not a founder. In my book nobody who is not working full time counts as a founder. Anyone who holds on to their day job gets a salary or IOUs, but not equity. If they hang onto that day job until the VC puts in funding and then comes to work for the company full time, they didn’t take nearly as much risk and they deserve to receive equity along with the first layer of employees. What if someone contributes equipment or other valuable goods (patents, domain names, etc) to the company? Great. Pay for that in cash or IOUs, not shares. Figure out the right price for that computer they brought with them, or their clever word-processing patent, and give them an IOU to be paid off when you’re doing well. Trying to buy things with equity at this early stage just creates inequality, arguments, and unfairness. How much should the investors own vs. the founders and employees? That depends on market conditions. Realistically, if the investors end up owning more than 50%, the founders are going to feel like sharecroppers and lose motivation, so good investors don’t get greedy that way. If the company can bootstrap without investors, the founders and employees might end up owning 100% of the company. Interestingly enough, the pressure is pretty strong to keep things balanced between investors and founders/employees; an old rule of thumb was that at IPO time (when you had hired all the employees and raised as much money as you were going to raise) the investors would have 50% and the founders/employees would have 50%, but with hot Internet companies in 2011, investors may end up owning a lot less than 50%. Conclusion There is no one-size-fits-all solution to this problem, but anything you can do to make it simple, transparent, straightforward, and, above-all, fair, will make your company much more likely to be successful. """

tomp 12y ago

Honestly, I don't see either of these as nothing but positive news (for the companies, not necessarily for all the people involved).

maxbrown 12y ago
They are probably long-term positive, but in the short-term they both could provoke negative press for the companies.

curiousDog 12y ago

As a side note, is it still wise/advisable to join Snapchat as an engineer? Particularly for Visa candidates whee the risk is higher?

dkfmn 12y ago
The value of the company is already so high that much of the upside is removed. You really have to believe in the company as a whole to make that commitment.
- shawabawa3 12y ago
  > You really have to believe in the company as a whole to make that commitment Or just get a good salary/benefits/etc
  - untog 12y ago
    Somewhere like Google will likely pay better, though.
    - ilikemustard 12y ago
      And would be harder to get a job with, presumably. I would venture that it would be much more difficult, but I'm simply speculating.
jacquesm 12y ago
If they pay you enough, sure, why not.
sunievl 12y ago
depends on what you want out of the job.. Are you looking to establish yourself as a good engineer? Hoping to make big money? Looking for a good salary, perks etc?

TaoloModisi 12y ago

It's interesting the news on Tinder and Snap Chat came around the same time of Apple’s new iPhones and iWatch release. In fact, it's no coincidence they must have been trying to hide behind the noise.

deleted 12y ago
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nl 12y ago
That's almost exactly what the headline of the article says!?
- k__ 12y ago
  Maybe he wanted a discussion about, how apple news bury interesting news. Instead of discussion how founders get screwed?
  - deleted 12y ago
    [deleted]
  - nl 12y ago
    Then post something interesting about it I guess. It's pretty clear it happened. Is there anything else to say about it? (Personally, I think the Tinder thing is more outrageous than the Snapchat thing, and it was a bigger drama when it first surfaced.)
    - TaoloModisi 12y ago
      It was smart of them to release bad news at the same time as the apple announcement. Not many have talked about the Tinder Issue and Snapchat’s settlement, as a result.

deleted 12y ago

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don_right 12y ago

Interesting-thanks!

crag 12y ago

Money. Greed. It destroys more friendships (and marriages) than anything else. So what's the lesson here? Don't be careless. I don't care what the idea (startup) is - get the details on paper. True, 99% of startups fail, but you don't want to be in that 1% that's making the lawyers rich.

TallGuyShort 12y ago
I think the other lesson here is to consciously know when you cross the line away from an amount of money you're willing to walk away from to save the friendship, and be sure that's what you want.
at-fates-hands 12y ago
>> Money. Greed. It destroys more friendships (and marriages) than anything else. This a thousand time. My first hard earned rule of thumb? Don't do business with your friends. Lost relationships, bitterness, and great financial loss is never worth it. I got burned really bad and spent the better part of four years trying to get my money back. Since then, it's just something I live by.
- gonzo 12y ago
  Friends? OK But I've been in business with my spouse for over a decade now.
  - zavulon 12y ago
    That's different. Your spouse's and yours financial interests are most likely aligned - you are both bringing in money to one family, so most likely there are no arguments who gets how much. With friends, you and your friend are competing for the same financial pie.
- maineldc 12y ago
  I am almost the complete opposite. I only start companies with friends and while there have been some issues, it has served me very well. I think it partly depends on the definition of friend. I don't start companies with acquaintances, I start them with people that I love and respect. When you do that, starting a company becomes a really special endeavor. This is very relevant for me at the moment because I am starting a new company and the person that I am hounding to be the founding CTO is a "newer friend" (we have only known each other for 4 years or so) but I am convinced that we will be a great team. My advice is to start companies to work with people you love vs. trying to make a bunch of money. It's such a great way to "work" and greed will have a hard time breaking that.

dreamweapon 12y ago

A beautiful way of saying, "We're sorry... but not really sorry."

jedanbik 12y ago

How is this Apple's fault? Slapping the big A on the headline seems like a derail at best.

serge2k 12y ago
It's not, it's just interesting that the level of media coverage of an Apple event overshadows everything else.
mikeyouse 12y ago
Not Apple's fault per se, just the Silicon Valley equivalent of a "Friday Night News Dump" that's common in industry and government.[1] It happened to be Apple this time, but it could have just as easily been a Google acquisition, some new Amazon product, basically anything guaranteed to get most of the attention and press. [1] - http://www.rff.org/Publications/Pages/PublicationDetails.aspx?PublicationID=21671 http://www.rff.org/Publications/Pages/PublicationDetails.asp...

autism_hurts 12y ago

Is there any interest in "this is how I got fucked" at a startup type article, or is it so common that it doesn't matter? I have an experience...

ma2rten 12y ago
I think, I would be interested.
discardorama 12y ago
> I have an experience... I think we all do! ;-) Back in the day, I was a co-founder in a company, started by my advisor's wife. She called us (me and a colleague) to their house, and promised the two of us 20% ownership (and the remaining 60% she kept). I worked like a dog for about 1.5 years, spending nights and weekends getting it off the ground (the business was website creation and other backend stuff). We managed to get the ear of one of the largest grocery chains in the country, and their VP came over to talk to us. My ideas were the core of the presentation. As soon as it looked like it might take off, she started cutting me out. Then one day, the locks were changed in the office! As her husband was still my advisor, I couldn't do anything but grumble and continue working on my dissertation. A few years later, the company was sold for $30MM.
- srj 12y ago
  Presumably you have your PhD now? Why not sue today?
  - discardorama 12y ago
    I thought about it after I graduated. The problem is: in the initial years, people ask for recommendations from your advisor; and as a PhD, you are basically tied to your advisor for life (people will always ask: who was your advisor?). After some thought, I decided to give it a rest and move on. I had learnt a valuable (and very pricey) lesson: always take things in writing.
    - 12y ago

snoman 12y ago

After the 3rd mention of Apple before the story intro was completed, in an article that (by all appearances) isn't actually about Apple at all, I decided that this just isn't a news source worth reading.

at-fates-hands 12y ago

Interesting all the outrage about Whitney Wolfe and all the articles about her and sexual harassment and sexism in tech while her case was going on. Now she finally wins her case and its like a blip on the radar? Pretty sad if you ask me.

notastartup 12y ago

From the headline, I thought that Apple had banned those two applications.