We’ll need you to continue investing in us, every year.
August 18, 2020 10:57 AM Subscribe
Not sure how many investor meetings the author has been on if they think this some sort of biting satire, because having a founder sit down and immediately start snidely demanding to know why they should allow an investor to hand them money is not that uncommon.
posted by sideshow at 11:35 AM on August 18, 2020 [4 favorites]
posted by sideshow at 11:35 AM on August 18, 2020 [4 favorites]
...yeah, a surprising number of founders think "negging" works on investors. It's actually encouraged by some advisors ("oooh, you're projecting such confidence!"). It also does, alas, work surprisingly often.
posted by aramaic at 11:53 AM on August 18, 2020
posted by aramaic at 11:53 AM on August 18, 2020
w0mbat, I thought this was funny, and successfully satirical -- thanks for posting it. In particular I liked the repeated "that’s not the right way to approach this" or "you're thinking about this the wrong way" attempts at sleight-of-hand. Yeah.
sideshow and aramaic: indeed, the top comment on the Hacker News discussion is making the same point!
posted by brainwane at 11:56 AM on August 18, 2020 [2 favorites]
sideshow and aramaic: indeed, the top comment on the Hacker News discussion is making the same point!
posted by brainwane at 11:56 AM on August 18, 2020 [2 favorites]
...yeah, a surprising number of founders think "negging" works on investors. It's actually encouraged by some advisors ("oooh, you're projecting such confidence!"). It also does, alas, work surprisingly often.
You know they are rich mostly because they got lucky and now that they have promoted themselves beyond their level of competence, they are in a world of pain.
posted by Foci for Analysis at 12:11 PM on August 18, 2020 [5 favorites]
You know they are rich mostly because they got lucky and now that they have promoted themselves beyond their level of competence, they are in a world of pain.
posted by Foci for Analysis at 12:11 PM on August 18, 2020 [5 favorites]
Since early employees at startups are often paid in lottery tickets stock options, there's really no difference here.
posted by adamrice at 12:25 PM on August 18, 2020
posted by adamrice at 12:25 PM on August 18, 2020
I thought it was going to be this joke:
My boss arrived at work in a brand-new Lamborghini.posted by clawsoon at 1:11 PM on August 18, 2020 [40 favorites]
I said, "Wow, that's an amazing car!"
He replied, "If you work hard, put all your hours in, and strive for excellence, I'll get another one next year."
You know they are rich mostly because they got lucky and now that they have promoted themselves beyond their level of competence, they are in a world of pain.
The type of person involved in the discussions this post is making fun of is usually not only not rich, but typically of the "missing X number of meals per week" variety. In fact, someone a step or two more successfully might describe themselves as "Ramen Profitable", which means they can turn a profit if they eat Instant Ramen for most meals.
That's part of the joke the author is going for. But, in my experience, nothing stops a group of 24 year olds, who can't even afford their own mattresses, from walking into a room and being total dicks to the person(s) who could be the difference between being able to purschase real food or not.
posted by sideshow at 2:09 PM on August 18, 2020
The type of person involved in the discussions this post is making fun of is usually not only not rich, but typically of the "missing X number of meals per week" variety. In fact, someone a step or two more successfully might describe themselves as "Ramen Profitable", which means they can turn a profit if they eat Instant Ramen for most meals.
That's part of the joke the author is going for. But, in my experience, nothing stops a group of 24 year olds, who can't even afford their own mattresses, from walking into a room and being total dicks to the person(s) who could be the difference between being able to purschase real food or not.
posted by sideshow at 2:09 PM on August 18, 2020
Here's my startup advice: never take a paycut to work at a startup unless they let you see the financials and you're getting angel-investor level equity or better. Even then, get paid.
Having an employee getting paid "too much" is the investor's problem, not the employee's.
The only person I knew who took equity over pay was already rich when he took the job and what a shock, after a few years he was even richer. But that was in the early 90's at a self-funded company. These days just get paid (well and get options too, but get paid.)
posted by GuyZero at 2:16 PM on August 18, 2020 [7 favorites]
Having an employee getting paid "too much" is the investor's problem, not the employee's.
The only person I knew who took equity over pay was already rich when he took the job and what a shock, after a few years he was even richer. But that was in the early 90's at a self-funded company. These days just get paid (well and get options too, but get paid.)
posted by GuyZero at 2:16 PM on August 18, 2020 [7 favorites]
Seconding the above.
The article also accurately captures how some genuinely well-intentioned founders can wildly over-value what they are offering to their employees.
Dear founder: I understand that you are all in on this business/have a vision/regard it as your life’s work.
If you expect that offering me 1% ownership in that vision will create an emotional investment that is equal to what you feel, you are setting us both up for failure.
posted by FallibleHuman at 2:35 PM on August 18, 2020 [2 favorites]
The article also accurately captures how some genuinely well-intentioned founders can wildly over-value what they are offering to their employees.
Dear founder: I understand that you are all in on this business/have a vision/regard it as your life’s work.
If you expect that offering me 1% ownership in that vision will create an emotional investment that is equal to what you feel, you are setting us both up for failure.
posted by FallibleHuman at 2:35 PM on August 18, 2020 [2 favorites]
Note that that's 1% before the final round of dilution.
Because there is always, ALWAYS a final dilution round before the sale/IPO happens.
posted by GuyZero at 2:37 PM on August 18, 2020 [4 favorites]
Because there is always, ALWAYS a final dilution round before the sale/IPO happens.
posted by GuyZero at 2:37 PM on August 18, 2020 [4 favorites]
Well... I went through an exit in 2018 and there wasn’t so “always”
posted by thedaniel at 2:54 PM on August 18, 2020
posted by thedaniel at 2:54 PM on August 18, 2020
I got an offer at a startup once, for employee #1 or #2, so basically would be working founder hours. Their compensation offer was so bad I wasn't sure that I understood it.
I calculated that I would "break even" compared to my current crappy job if they:
- had a liquidity event of 600 million dollars after two years (basically impossible)
- granted me all the options at those two years (unlikely, usually it's four or worse)
- had no dilution (impossible, they were already running out of money)
I politely refused, and then again when they called me a month later with slightly higher numbers, with a weak promise to make them market when/if they ever got more funding.
They actually got acquired after three years... for barely more than a million. Their options were practically worthless.
posted by meowzilla at 3:01 PM on August 18, 2020 [5 favorites]
I calculated that I would "break even" compared to my current crappy job if they:
- had a liquidity event of 600 million dollars after two years (basically impossible)
- granted me all the options at those two years (unlikely, usually it's four or worse)
- had no dilution (impossible, they were already running out of money)
I politely refused, and then again when they called me a month later with slightly higher numbers, with a weak promise to make them market when/if they ever got more funding.
They actually got acquired after three years... for barely more than a million. Their options were practically worthless.
posted by meowzilla at 3:01 PM on August 18, 2020 [5 favorites]
If your highly speculative business plan only "pencils out" when you pay below-market wages, then you should understand that this is a sign that you are bad at businessing, and most likely even worse at managing.
posted by Anoplura at 5:32 PM on August 18, 2020 [5 favorites]
posted by Anoplura at 5:32 PM on August 18, 2020 [5 favorites]
If your highly speculative business plan only "pencils out" when you pay below-market wages
In the specific milieu that we're talking about, market wages are influenced by a.) a few big companies with deep pockets and b.) a hype-driven investment culture to an extent that makes me feel it's not really fair to say people are bad at business if they can't compete. But of course as a prospective employee that's not your problem.
posted by atoxyl at 6:07 PM on August 18, 2020
In the specific milieu that we're talking about, market wages are influenced by a.) a few big companies with deep pockets and b.) a hype-driven investment culture to an extent that makes me feel it's not really fair to say people are bad at business if they can't compete. But of course as a prospective employee that's not your problem.
posted by atoxyl at 6:07 PM on August 18, 2020
I was negotiating to join a startup once and every time I questioned any of their terms or salary or anything they just increased the amount of stock. In the end it was 4 times their first offer and I sort of had to take the job.
This was a practical company who made money and had good prospects.
The punchline is that they fired me without cause shortly before the 1 year first vesting. They never had any intention of actually giving me any of that stock. It was just a way to get me to do a lot of much needed work on their app without charging contractor rates. According to the Git logs, they had done this to person after person in the same role.
posted by w0mbat at 6:32 PM on August 18, 2020 [3 favorites]
This was a practical company who made money and had good prospects.
The punchline is that they fired me without cause shortly before the 1 year first vesting. They never had any intention of actually giving me any of that stock. It was just a way to get me to do a lot of much needed work on their app without charging contractor rates. According to the Git logs, they had done this to person after person in the same role.
posted by w0mbat at 6:32 PM on August 18, 2020 [3 favorites]
According to the Git logs, they had done this to person after person in the same role.
At that point wouldn't you just want an iron clad vesting agreement or just quit on the spot?
posted by Your Childhood Pet Rock at 6:51 PM on August 18, 2020
At that point wouldn't you just want an iron clad vesting agreement or just quit on the spot?
posted by Your Childhood Pet Rock at 6:51 PM on August 18, 2020
😬 This hurts, and lines up with reality. Equity is wild because it's a luxury inequality. But boy is it unequal: to the tune of 10x and 100x differences between people hired one month or another, or just arbitrarily adjusted by 2x or 3x because someone asked.
There's a big gap between 'small company where you can get >1%' and 'big company where you get cash and liquidity.' Beware of that gap.
posted by tmcw at 8:07 PM on August 18, 2020 [2 favorites]
There's a big gap between 'small company where you can get >1%' and 'big company where you get cash and liquidity.' Beware of that gap.
posted by tmcw at 8:07 PM on August 18, 2020 [2 favorites]
People who want a more straightforward "here's how to think about these offers" advice post to share with their friends considering offers: Julia Evans's "Things you should know about stock options before negotiating an offer".
posted by brainwane at 4:31 AM on August 19, 2020 [2 favorites]
posted by brainwane at 4:31 AM on August 19, 2020 [2 favorites]
Oh hey look, a horror of capitalism I was blissfully unaware of
posted by eustatic at 6:30 PM on August 20, 2020
posted by eustatic at 6:30 PM on August 20, 2020
« Older British & Exotic Mineralogy | "when I looked at my soybeans, something clicked" Newer »
This thread has been archived and is closed to new comments
posted by kickingtheground at 11:32 AM on August 18, 2020 [1 favorite]