Huh I didn’t know about the stock angle. Apparently it was a purchase agreement since they were pre-IPO, not a giveaway. So he got some pre-ipo financing and a look at great research tech. Very cool deal, thanks for the pointer.
Is this a recent offer or an old offer with current valuation of their stock? The latter seems reasonably if the stock offer had a five-figure valuation but a recent offer of 600k in stock seems ludicrous. Are public tech companies really offering that much in compensation these days?
I joined a startup several years ago as an early engineer. The company was acquired last year, and my equity was worth more than $1m after investors were paid.
This reminds me of what the owners of Kingston Technology did when they sold their company back in the 90s. They allocated a large sum to be distributed to the employees, and also were helping employees with startups. I think they eventually bought the company back.
Starting equity was a little less than 10%. Valuations went up as several rounds were raised up to $30+m and share value went up until at one point it was north of $20m paper dollars. After market re-valuation an additional $60+m was raised and value went down a little but was still substantial. Then the IPO market all but disappeared. Final sale price was around $150m and common shareholders including myself initially received zero. Essentially the VCs converted their preferred to common and then voted to sell to a related party (another company the same VC firm had invested in).
According to a lawyer who setup our initial investments, this was actually illegal so common investors including myself sued, but was this bankrolled by one of the big early investors as it's incredibly expensive to try and do a shareholder lawsuit against a major VC firm and investment bank. It ended up being settled out of court and that's where my $100,000 came from. The CEO came out a little better, but people who sweated years (and I mean frequent all nighters, weekends, true dedication) ended up with even less than me. And the only reason we even received anything at all was because we had a HNWI common investor who also got screwed and backed the lawsuit, they ended up getting their money back and a small return on investment from what I remember of the settlement terms.
Just a word of caution to founders and early employees of startups to know what they are getting in to and the typical case of what happens (a small or non existent exit is the typical case in a tech startup), even when you see those big number raises and a big sale and you just assume that everyone is making bank.
Yeah, that's going to depend on what strike price they got in at. But this is the whole reason startup options are a lottery ticket, not actual compensation. Sometimes you win, and most of the time you lose.
She wrote in the thread that people received 1000, 2000 shares. They are trading at about 35$ now. Who knows, they could skyrocket a few years from now and be worth millions, but at the moment they are worth a good amount of money but not a life changing one. Nothing to be sad about.
I worked for a startup many years ago (so they called themselves but being a phone operator before virtual ones they had to start big, 2k people and more.) They offered me options but I asked for more salary and less options. It turned to be the right decision because they got close to the IPO but never really did it.
Not sure if this is still true, as most of these sorts of companies have gone public, but there was a period between 2015 and 2019 where these sorts of late stage startups were paying comparable base salaries but were giving what was essential double the amount of equity. For people who got this deal and held onto their stock until today they're better off by a lot than had they worked at FANG.
I had 26,000 share in a company TouchCommerce that got bought out by Nuance for about $250-million. I netted about $9,000.
What did I learn? Start your own company is best. second best is to license a trademark or a patent to the startup to ensure that you are square in the center of the equity pie. YMMV
As someone pointed out above, this deal seems to be modeled after DST’s 2009 tender offer for Facebook shares - they paid a 35% discount for common shares from employees and early investors. DST cashed out in the IPO making a return of around ~18x.
interesting that the stock grant was based on monday's close price. is that common? or accurate? because if true they would technically want the stock to TANK on the announcement so they could get more shares? :) just fun to think about.
they deserve it for the risk taking and management. github is a once in a decade, maybe century, company.
For those that own stock or options earned and vested, it's a weighty validation about the value of that asset. Assuming the there is a core of early programmers that collectively own 5-15% of the stock but are not involved in the financing side of the business, I am sure they feel differently following this investment/valuation. A 0.1% stake is a big deal now.
IPOs of this decade in tech seem to be a different beast. Much bigger. Companies seem to be successfully raising large (+100m+) sums without going to pubic markets.
Understanding the implications of this is beyond my pay grade, but I imagine there are some complex relationships with early employee and investors. IPOs allow stockholders to cash out and the company itself to raise capital. Companies have an alternative way of raising capital which many now prefer. I imagine that all demand for their stock from later stage investors can be channeled into to company's coffers this way without dilution by stockholders.
Either way for employees that have some tenure at Square, being now valued at $6bn is much better than being valued at $600m or $60m.
The $1.7M investment was a seed round (in Oct 2013), with lots of individuals putting money in[1]. If it were bought for say $20M (who knows?) then I'm pretty sure those seed investors would be happy with their 5x to 10x returns (depending on liquidation preferences) in 6 months.
If it were bought for $5M, then not so much. But if it was only $5M on the table I doubt they would have sold that quickly.
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