HN user
Care to share some of that real data? You're right about the haze of wishful thinking around the issue and seem to be in a position to clear it up a bit. You can infer something about the value of face time from the universal FAANG commitment to centralized HQs, despite the huge costs of this policy.
For better or for worse, the system is named "capitalism" not "hardworkerism".
In the "you can't cheat an honest man" department, you can be sure that some of the engineers complaining about nepotism now were expecting to cash in on the CEO's connections when they signed on.
This one is really stretching the definition of an acquihire. It may be that the $2-$5M is unvested stock for the team itself.
See points 3-6 here: http://daslee.me/quick-thoughts-on-acquihiressoft-landings
The cynic in you is right. The employees have power in an acqui-hire, but they don't negotiate as a group.
If you avoid the questions "why was this written" and "how did it get from the author to my eyeballs" you will never develop a working bullshit detector.
Thanks for your passive-aggressive reply. My comment was directed at the author, not at you. I don't know what if any connection you have to the author.
However, you should note the content-free enthusiastic comment by LeonW, posted right after you submitted the article, in which he does not mention that he is the author's co-founder. You might also have noticed that many articles from this blog are similar: a catchy headline, a bunch of vague inspirational words on an uncontroversial subject, a token link to the conversion funnel, and a surprisingly high rank on the HN front page.
If you aren't even slightly suspicious that this article is 99% conversion fodder and maybe 1% altruism, I am not going to be able to explain it to you.
You are actually hurting startup founders by farting out this HN-optimized fluff of platitudes and having your co-founder vote it up. Please stop it.
None of my software-engineer friends are doing things they don't want to do.
Your friends sound young.
They are bullshitting you. Big companies can have rigid salary structures, but at a startup you have lower pay because that's what you accepted. The degree argument is a negotiating tactic to get you to accept lower pay.
That said, if you don't get a degree you will likely be fighting this battle over and over for the rest of your working life. And college is a lot more fun when you're the same age as your classmates.
terminology around this issue can be VERY confusing
You are not making it any simpler by redefining "control" in this theoretical way. You are making some very naive assumptions about independence: you'd be much better off treating the investors as a single voting bloc, which is what the usual sense of "control" assumes - and if there are multiple founders you should assume that serial investors are very sophisticated at splitting them.
A good followup would be to go out and actually measure the distribution of voting outcomes rather than making a strong claim based on the most tractable assumptions you can find.
Founder shares get diluted in a down round, but employee options go completely underwater.
Some of the advantages listed in the article are questionable. A talent pool so small that everybody knows each other, potential partners who are so out of the loop that they don't know about your established competitors, and the opportunity to hire ex-finance guys who were unhappy with their last bonus.
Google has some inner conflict here. The marketing strategy is "more private than Facebook" but the obvious way to measure the success of Google+ is by how much oversharing people are doing. Optimize for that and you get pushy UX like the one described. Hopefully they can figure out a more nuanced metric.
This is human nature, not specific to geeks or men. If you call somebody on their bullshit you have to expect some blowback, even if you do it as tactfully as Jessamyn did in this case.
What's sad is that one of the guys on the team could have fixed this with much less awkwardness, but apparently none of them stepped up.
Usually: millions to the investors and founders for their stock. Employee stock will be worth little due to investor preferences. The acquirer will pay hundreds of thousands to retain a few "key employees", and tens of thousands to the ordinary developers (similar to what they'd get as a hiring bonus). This is why it doesn't make sense to be a startup employee.
Your question about why developers can't capture more of their value is a good one. Obviously acquirers would prefer not to pay $1M signing bonuses if they can avoid it, but they also seem to be happier about paying off VCs than engineers.
This looks like fake reporting, written by some SEO hack and paid for by the owner of one of the domains in question.
Totally disagree on #2. Walking into a better gig is easy, but it means you lose years of investment in the previous company (due to dilution, preferences, loss of retention bonus on acquisition, etc). Many of us on the engineering side consider that "getting screwed" even if folks on the executive side think of it as business as usual.
To the OP, I would suggest that the only sure-fire way to avoid getting screwed is to remain indispensable all the way through to a liquidity event. Even then, employee #9 may not see much from their equity.
This is shockingly irresponsible advice. Standard investment advice is that you should become more risk-averse with age. Entrepreneurship is high risk and high reward. Why not "invest" your retirement savings in lottery tickets while you're at it?
The most likely exit for today's startups is a talent acquisition. In that event, would you rather be at an "undercapitalized" startup or an "overcapitalized" startup?
Startups are risky to begin with, but raising a big round shifts the risk from founders to employees.
Based on the emails I get from recruiters bragging about how much money their companies have raised, it's clear that most engineers don't understand this, even if it's obvious to founders.
Sure, the VCs know how to take care of themselves, but what about the risk of putting your employees underwater?
Talent ... As a rule of thumb, these acquisitions are priced at approximately $1M/engineer
Of which more than 90% will go to the founders and investors. The engineers being bought for $1M will be lucky to get $100K out of it.
Anybody out there want to justify or at least explain this practice?
This is why Gowalla's investors are diversified across multiple startups. For them this is just one setback in a much larger game.
The people getting screwed here are Gowalla's employees, who put years of effort into a single project and whose options are now worth zero.
Because the common stockholders don't have a seat at the table. Instead, when the company decides to sell, the execs fully dilute the common by granting themselves the remainder of the pool (with acceleration on change of control, of course).
Well that just scared the crap out of me. Fortunately, the rest of the net believes that you have 30 days from the date of purchase.
Actually, it looks like Fred Wilson did an example here: http://www.avc.com/a_vc/2011/10/liquidation-analysis-continu...
Note that his example does not show a multiple on the liquidation preference, and it doesn't show how the early employees can get screwed even when the founders do well. But it's more realistic than Suster's infographic.
Unfortunately not. The people who have that spreadsheet would find it very hard to hire if employees knew how the game was rigged.
When investors talk about dilution numbers they only present the best case scenario, and this post is no exception.
If you really want to understand dilution, don't look at the best case. You need a graph showing your payoff as a function of exit size. Pay special attention to the range where liquidation preferences and multipliers kick in, because the sharks aren't going make you an infographic for that case.
Glad to hear it. Chrome is great in every other way.