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When Google went public the valuation was ~$23 Billion (they raised just under $2 billion in the IPO) [1]. However to your point this was around 6 years after

by birken 12y ago

When Google went public the valuation was ~$23 Billion (they raised just under $2 billion in the IPO) [1]. However to your point this was around 6 years after founding, whereas Facebook was valued at ~15 billion by Microsoft in 2007, 3 years after it was founded. I had a friend who turned down a job at Facebook in late 2008 because he felt the 15 billion valuation was very high and it limited his upside. And before about July '13 when FB's stock started a huge rise, this was pretty correct thinking. There is also still a problem with all of this revisionist valuation stuff for a company like Facebook. It only would be worth some obscene amount if: a) you got a generous stock option package when you joined b) you stayed with the company until the IPO (so you could actually both have a chance to sell your stock and pay the exercise costs) c) you didn't sell until right now after the stock has massively appreciated in the past year. And even still you are going to be paying regular income tax on all of that gain which is going to be around 50% if you live in California. [1]: http://www.washingtonpost.com/wp-dyn/articles/A14939-2004Aug19.html http://www.washingtonpost.com/wp-dyn/articles/A14939-2004Aug...

7Figures2Commas 12y ago
Yes, you are correct. Your friend didn't necessarily make a bad decision. Facebook traded as low as ~$18/share in 2012 and didn't get back to its IPO closing price until mid-2013. According to a media report[1], at one point, even employees who joined the company as late as the end of 2010 were underwater. So anybody (you, me, your friend) could have purchased FB shares with a cost basis lower than that of many employees. Given this, it's somewhat disingenuous for Dustin to use Facebook's current valuation to demonstrate "getting rich at a startup." It's actually a better demonstration of "getting rich trading the stock market." Adding insult to injury is the fact that the investor with long-term capital gains receives more favorable tax treatment on his or her gains than employees usually receive. Incidentally, employees who don't exercise and sell as soon as they can are effectively investing their hard-earned gains back into their employer's stock. Depending on how well the company's stock does, and when sales are timed, this can either be a really profitable thing or a really unprofitable thing. [1] http://www.businessinsider.com/facebook-lockup-release-2012-8 http://www.businessinsider.com/facebook-lockup-release-2012-...
- prostoalex 12y ago
  > even employees who joined the company as late as the end of 2010 were underwater That is not correct usage of the term. According to external report, Facebook stopped issuing stock options to employees as of 2007. People joining in 2010 would be receiving RSUs, whose "strike price" is $0. While the monetary value of the shares at IPO was different than the value they imagined, they would not be underwater (having a strike price above market price, thus rendering options meaningless). http://www.nytimes.com/2012/02/02/technology/for-founders-to-decorators-facebook-riches.html?pagewanted=all http://www.nytimes.com/2012/02/02/technology/for-founders-to...
  - 7Figures2Commas 12y ago
    I was not privy to when Facebook started granting RSUs instead of options. My use of the term "underwater" was based on what was reported. Still, this is a red herring. The fundamental point of my comment was that in the past couple of years, every single person here had the ability to purchase Facebook shares on terms just as favorable if not more favorable than many Facebook employees without having to spend a single day working for the company. In fact, in the past several years, you could have on favorable terms purchased shares in any number of tech companies that have delivered fantastic gains to shareholders. Obviously, timing investments (or trades depending on your persuasion) is easier said than done, but it's probably no more difficult than trying to determine whether the startup you're going to work at for the next four years of your life is the next Facebook or the next MySpace.
    - prostoalex 12y ago
      > every single person here had the ability to purchase Facebook shares on terms just as favorable if not more favorable than many Facebook employees But RSUs are not purchased, they are gifted. So having an opportunity to purchase 10,000 shares of FB at low-low 2012 prices is still expensive compared to a gift of 10,000 shares vesting over 4 years. I pulled the 10,000 number out of a hat, but I'm not too far off - here's a question from 2011 http://www.quora.com/Is-110-000-and-15000-RSUs-a-good-starting-salary-at-Facebook-for-an-Ivy-League-PhD http://www.quora.com/Is-110-000-and-15000-RSUs-a-good-starti... numbers were probably more attractive at earlier years.
prostoalex 12y ago
> I had a friend who turned down a job at Facebook in late 2008 because he felt the 15 billion valuation was very high and it limited his upside. He was way off and probably did not ask the recruiter proper questions. Common stock issued to employees is a different class from preferred stock issued to Microsoft.
- birken 12y ago
  Well really at the end of the day all that matters is whether this statement (from the video) is true: > Even if you joined Facebook as employee #1000, so you joined it in like 2009, you still made 20 million dollars. I find it hard to believe that it is true, but obviously both you and the speaker know much more about it than I do. However I've also seem people commonly overstate things like this. Some basic math: $200 billion current value / ($15 billion value in 2009 * 50% discount factor from preferred to common) = 26.6x So already assuming the most optimistic things [1], to get to $20 million dollars today, you'd have needed to get the equivalent of $750k worth of RSUs in 2009. Even vesting over 4 years that seems like an extremely high amount, high by a factor of about 5-10x of what I'd guess. And don't get me wrong, I have no doubt people who joined Facebook in 2009 earned quite a bit of money assuming they held onto the stock. But 20 million dollars is a big number. --- [1]: The employee joined in 2009, you still work there, you haven't sold most of your stock (which is impossible because you had to sell some in the IPO to pay your taxes, but whatever)
  - prostoalex 12y ago
    Right, Dustin assumes a 0.1% grant for employee #100 and a 0.01% grant for employee #1000, but * typically at that stage those levels of equity are reserved for highly desirable hires that would otherwise be tough to get * this discounts the effects of dilution that each new investment round (as well as IPO) brings along I think his point was to provide a ballpark figure to illustrate the main idea - you might have more impact (and receive appropriate compensation) even when joining a late-stage company, so don't dismiss that opportunity without at least considering it. Taxation rarely plays into such arguments, since by the time the company reaches employee #1000 it's likely to be global, and similar employees with similar compensation packages in California, Washington, Canada or Switzerland are likely to see substantially different after-tax amounts.

by birken 12y ago

7Figures2Commas 12y ago

Yes, you are correct. Your friend didn't necessarily make a bad decision. Facebook traded as low as ~$18/share in 2012 and didn't get back to its IPO closing price until mid-2013. According to a media report[1], at one point, even employees who joined the company as late as the end of 2010 were underwater. So anybody (you, me, your friend) could have purchased FB shares with a cost basis lower than that of many employees. Given this, it's somewhat disingenuous for Dustin to use Facebook's current valuation to demonstrate "getting rich at a startup." It's actually a better demonstration of "getting rich trading the stock market." Adding insult to injury is the fact that the investor with long-term capital gains receives more favorable tax treatment on his or her gains than employees usually receive. Incidentally, employees who don't exercise and sell as soon as they can are effectively investing their hard-earned gains back into their employer's stock. Depending on how well the company's stock does, and when sales are timed, this can either be a really profitable thing or a really unprofitable thing. [1] http://www.businessinsider.com/facebook-lockup-release-2012-8 http://www.businessinsider.com/facebook-lockup-release-2012-...

prostoalex 12y ago
> even employees who joined the company as late as the end of 2010 were underwater That is not correct usage of the term. According to external report, Facebook stopped issuing stock options to employees as of 2007. People joining in 2010 would be receiving RSUs, whose "strike price" is $0. While the monetary value of the shares at IPO was different than the value they imagined, they would not be underwater (having a strike price above market price, thus rendering options meaningless). http://www.nytimes.com/2012/02/02/technology/for-founders-to-decorators-facebook-riches.html?pagewanted=all http://www.nytimes.com/2012/02/02/technology/for-founders-to...
- 7Figures2Commas 12y ago
  I was not privy to when Facebook started granting RSUs instead of options. My use of the term "underwater" was based on what was reported. Still, this is a red herring. The fundamental point of my comment was that in the past couple of years, every single person here had the ability to purchase Facebook shares on terms just as favorable if not more favorable than many Facebook employees without having to spend a single day working for the company. In fact, in the past several years, you could have on favorable terms purchased shares in any number of tech companies that have delivered fantastic gains to shareholders. Obviously, timing investments (or trades depending on your persuasion) is easier said than done, but it's probably no more difficult than trying to determine whether the startup you're going to work at for the next four years of your life is the next Facebook or the next MySpace.
  - prostoalex 12y ago
    > every single person here had the ability to purchase Facebook shares on terms just as favorable if not more favorable than many Facebook employees But RSUs are not purchased, they are gifted. So having an opportunity to purchase 10,000 shares of FB at low-low 2012 prices is still expensive compared to a gift of 10,000 shares vesting over 4 years. I pulled the 10,000 number out of a hat, but I'm not too far off - here's a question from 2011 http://www.quora.com/Is-110-000-and-15000-RSUs-a-good-starting-salary-at-Facebook-for-an-Ivy-League-PhD http://www.quora.com/Is-110-000-and-15000-RSUs-a-good-starti... numbers were probably more attractive at earlier years.

prostoalex 12y ago

> I had a friend who turned down a job at Facebook in late 2008 because he felt the 15 billion valuation was very high and it limited his upside. He was way off and probably did not ask the recruiter proper questions. Common stock issued to employees is a different class from preferred stock issued to Microsoft.

birken 12y ago
Well really at the end of the day all that matters is whether this statement (from the video) is true: > Even if you joined Facebook as employee #1000, so you joined it in like 2009, you still made 20 million dollars. I find it hard to believe that it is true, but obviously both you and the speaker know much more about it than I do. However I've also seem people commonly overstate things like this. Some basic math: $200 billion current value / ($15 billion value in 2009 * 50% discount factor from preferred to common) = 26.6x So already assuming the most optimistic things [1], to get to $20 million dollars today, you'd have needed to get the equivalent of $750k worth of RSUs in 2009. Even vesting over 4 years that seems like an extremely high amount, high by a factor of about 5-10x of what I'd guess. And don't get me wrong, I have no doubt people who joined Facebook in 2009 earned quite a bit of money assuming they held onto the stock. But 20 million dollars is a big number. --- [1]: The employee joined in 2009, you still work there, you haven't sold most of your stock (which is impossible because you had to sell some in the IPO to pay your taxes, but whatever)
- prostoalex 12y ago
  Right, Dustin assumes a 0.1% grant for employee #100 and a 0.01% grant for employee #1000, but * typically at that stage those levels of equity are reserved for highly desirable hires that would otherwise be tough to get * this discounts the effects of dilution that each new investment round (as well as IPO) brings along I think his point was to provide a ballpark figure to illustrate the main idea - you might have more impact (and receive appropriate compensation) even when joining a late-stage company, so don't dismiss that opportunity without at least considering it. Taxation rarely plays into such arguments, since by the time the company reaches employee #1000 it's likely to be global, and similar employees with similar compensation packages in California, Washington, Canada or Switzerland are likely to see substantially different after-tax amounts.