4 ms·

Yeah, but did those people with a 1mm+ net worth get it startup-ing, by going to oracle/google/fb and banking a bunch of their comp, or by getting lucky in the

by x0x0 11y ago

Yeah, but did those people with a 1mm+ net worth get it startup-ing, by going to oracle/google/fb and banking a bunch of their comp, or by getting lucky in the valley real estate lottery? Also, I feel like the article directly addressed your, imo, somewhat dated impressions. In the new unicorn world (1) startups take much longer to go public: there was a recent discussion here about how exits have now become 7-10+ years on average (2) companies aren't shy about preventing employees from selling: viz examples in the article, or the cto of another startup (I originally wrote slack but my memory was incorrect) on here describing how they effectively prevent even fully vested employees from leaving (while often the cto/ceo/c* are allowed to sell a million or two, if they aren't already wealthy) (3) unicorns taking huge rounds often give the next round's growth to the current employees and create giant preference overhangs; this is the flip side of raising a huge round if you can Does the above mean nobody makes $1-2mm? Certainly not, but it does shift the probability distribution.

ChuckMcM 11y ago
So be careful In (1) the challenge is that internal valuations means that folks who cannot get stock cannot participate in the growth of value, however as an employee with a stock option you do get to participate in value growth. If you join and your option's strike price is $1 and when that company goes publiic its worth several billion, your stock value will reflect the growth during your stay in the company. In (2) there are things you can do, and things you can't which will be controlled by the company bylaws. That said, if the company has a lot of "sweetheart" deals just for the executives then you already know its a screwed up place and you might want to seek out a different place to accumulate value. Some companies are run by people who are ill suited to be in that position, recognize that and leave, it isn't like there is a scarcity of positions around. Further, if you've been in this situation you can (and probably should) ask when you're interviewing if there are any provisions for employees to see their stock as part of a fund raising round. Here too, one needs to understand stock and value. Typically a privately held company will have two classes of stock, one called "preferred" and one called "common". Preferred stock is usually sold to investors, and sometimes given to the founders. Common stock is usually given to employees. Preferred stock carries special "powers" in the privately held company, it may have preferential liquidation rights, it may get to vote on board decisions, it may have resale rights. Common stock typically has no special rights. But none of that is important when the company goes public, because all shares turn into common shares (although there may be different voting classes like there are for Google shares). It is also true if the acquisition price exceeeds the liquidation preference for the preferred stock. Some money, and/or stock from the acquiring company will filter down to people with common shares. I completely agree with you on (3). The preference overhangs are bad for employees, and I think they are bad for founders too. So if you are a company that can't go public and you don't have enough revenue to continue operations, that may be your only choice. Or you can just admit you're dead and exit. But back to my original point the founders are going to have to believe that with this next round of funding they can get to a viable selfsustaining business. You don't have to buy into that as an employee, you can say, "I'm just not seeing it." and move on. The founders don't get that choice.

by x0x0 11y ago

ChuckMcM 11y ago

So be careful In (1) the challenge is that internal valuations means that folks who cannot get stock cannot participate in the growth of value, however as an employee with a stock option you do get to participate in value growth. If you join and your option's strike price is $1 and when that company goes publiic its worth several billion, your stock value will reflect the growth during your stay in the company. In (2) there are things you can do, and things you can't which will be controlled by the company bylaws. That said, if the company has a lot of "sweetheart" deals just for the executives then you already know its a screwed up place and you might want to seek out a different place to accumulate value. Some companies are run by people who are ill suited to be in that position, recognize that and leave, it isn't like there is a scarcity of positions around. Further, if you've been in this situation you can (and probably should) ask when you're interviewing if there are any provisions for employees to see their stock as part of a fund raising round. Here too, one needs to understand stock and value. Typically a privately held company will have two classes of stock, one called "preferred" and one called "common". Preferred stock is usually sold to investors, and sometimes given to the founders. Common stock is usually given to employees. Preferred stock carries special "powers" in the privately held company, it may have preferential liquidation rights, it may get to vote on board decisions, it may have resale rights. Common stock typically has no special rights. But none of that is important when the company goes public, because all shares turn into common shares (although there may be different voting classes like there are for Google shares). It is also true if the acquisition price exceeeds the liquidation preference for the preferred stock. Some money, and/or stock from the acquiring company will filter down to people with common shares. I completely agree with you on (3). The preference overhangs are bad for employees, and I think they are bad for founders too. So if you are a company that can't go public and you don't have enough revenue to continue operations, that may be your only choice. Or you can just admit you're dead and exit. But back to my original point the founders are going to have to believe that with this next round of funding they can get to a viable selfsustaining business. You don't have to buy into that as an employee, you can say, "I'm just not seeing it." and move on. The founders don't get that choice.