6 ms·

Another example of the growing trend of buying out key parts of a company to avoid any actual acquisition? I wonder if equity holding employees get anything fr

Another example of the growing trend of buying out key parts of a company to avoid any actual acquisition? I wonder if equity holding employees get anything from the deal or indeed if all the investors will be seeing a return from this?

lumost 9mo ago
I wonder if such deals will create employee lawsuits. I'd certainly be looking at legal options if I was one of the founding employees.
- wmf 9mo ago
  The employees are getting paid twice.
  - sleepingreset 9mo ago
    wdym?
    - wmf 9mo ago
      They get a share of the $20B plus now they get to work for Nvidia.
  - idiotsecant 9mo ago
    The employees are getting paid zero times.
    - petcat 9mo ago
      do they make a salary
      - simonh 9mo ago
        If part of their remuneration is in shares, they have a legitimate interest in the value of those shares.
      - crote 9mo ago
        Startups often pay a shitty salary in exchange for a decent chunk of stock options, with the implicit promise that you'll make bank if you work hard and make the company successful. Getting screwed out of your payout by such a totally-not-an-acquisition is wage theft. It's like promising a sales-related bonus at the beginning of the year, and then in December changing the metric to "AI-related sales to the CEO's golf buddies".
        tgma 9mo ago
        The implicit promise is only partially true. Very rarely you can find a proven talent that will actually forego significant salary. Often time when that happens the person is close to founders and will have a significant role in shaping the startup and will get quasi-acquired too. This promise may have been more true before 2010s where public companies were not paying as much in liquid cash and private companies were not valued so aggressively. Fact is most employees take the startup offer because they don't actually have a liquid offer that's super competitive at that moment, or they are just kind of bored and taking a break of the corporate job that does not give them too many responsibilities, i.e. they are compensated via the title, not just the promise of making bank.
        lumost 9mo ago
        That just means you’re pulling from the lower end of the talent pool. There is nothing wrong with this, but usually talent is correlated with outcome. Most hot startups which are going places are near impossible to get into even for folks with good offers.
        tgma 9mo ago
        Your last sentence is not mutually exclusive with my statement. Both could be simultaneously true. The sheer number of big company employees compared to hot startup makes it hard for everyone good to get into the startup, especially considering they usually have more specific needs. That said it could also be the case that the hot startup cannot easily get good employees from big company. My point was more that the high end ones they do get are usually in the front piece of the airplane in the acquisition split. Also, the really hot startups are actually paying quite a bit of cash upfront so the original premise of employee sacrifice isn’t as true.
- sandworm101 9mo ago
  >> one of the founding employees If you were an employee, you were not a founder. A founding-employee would be someone who explicitly "invested" time/money into a company without compensation. If you are also an employee earning a wage you better have a written agreement stating what amount was "investment" and what amount was compensated wage.
  - lumost 9mo ago
    Startups typically offer employees, particularly early employees, substantial equity compensation. If the employer is offering this compensation in bad faith, or otherwise preferring one equity holder over another without an explicit contract - then they are at the very least a crappy business partner. A founding engineer with a 2% stake could be missing out on 5-10 million of this transaction. As an aside, most founders are paid during the entire project. It’s not hard to raise a preseed round to get yourself paid for 6-24 months to work on an idea. If a founder chose to bootstrap - that’s all fine, but let’s not pretend that the employees aren’t taking massive career risks vs “standard” employers.
    - lovich 9mo ago
      > If the employer is offering this compensation in bad faith, or otherwise preferring one equity holder over another without an explicit contract - then they are at the very least a crappy business partner. I don’t know about you, but every company I’ve ever worked at is a shitty business partner if that’s the metric. The standard has always been I get what we agreed to if I was lucky, and otherwise I got full “I’ve altered the deal, pray I don’t alter further” and dared you to defend your rights. I actually have called their bluff a few times and gotten some money out of it, but it was always a year long event or more to resolution and involved risking even more money on lawyers.
  - crote 9mo ago
    Just one slight problem: people need to eat, and food costs money. Your startup won't succeed when its founder starves to death. It's why the founder will usually get a bunch of cash during investment rounds [0]: they can't focus on the company if they are constantly worried about cash in their personal life. Unless the founder is already independently wealthy, it is a guarantee that they'll be employed by the company and being paid a living wage. Heck, in some countries this is even legally required! According to your logic, no successful startup will ever have a founder, as any form of pay instantly degrades them to regular employee, and any kind risk taken and below-market salary is completely irrelevant. Never mind the fact that they are taking home a minimum-wage salary while working 100 hours a week - they are earning a wage so they can't possibly be a founder. So if this logic already breaks down for the founder, why couldn't it also break down for early employees whose compensation is mostly in stock options? How is their situation any different from the founder's? [0]: https://www.stefantheard.com/silicon-valleys-best-kept-secret-founder-liquidity/ https://www.stefantheard.com/silicon-valleys-best-kept-secre...
- sandworm101 9mo ago
  >> one of the founding employees If you were an employee, you were not a founder. A founding-employee would be someone who explicitly "invested" uncompensated time/money into a company without compensation and also worked as an employee. If you are also an employee earning a wage you better have a written agreement stating what amount was "investment" and what amount was compensated wage.
  - deleted 9mo ago
    [deleted]
- SilverElfin 9mo ago
  It should. Look at what happened at Windsurf when Google did something like this https://news.ycombinator.com/item?id=44673296 https://news.ycombinator.com/item?id=44673296
jbkkd 9mo ago
I have a friend who worked in a company that got "not acquired" in a similar deal. She didn't see a dime out of it, and was let off (together with a big chunk of people) within 6 months.
- sigmoid10 9mo ago
  As this gets more common, I think it will eventually lead to startups having a hard time attracting talent with lucrative equity compensation. It will be interesting to see how long it takes until this catches on among employees, but I already wouldn't take any positions in startups with a significant payment in equity anymore. The chances are slim that this pays out anyways, but now even when you are successful, noone will stop some megacorp from just buying the product and key employees and leaving everyone else with their stake in the dust.
  - oblio 9mo ago
    With the job market being in the state it is in, there will always be people wanting to take their chances. Let's face it and accept that the golden days of people working in tech startup (and soon large companies) are over. RIP 1980 - 2023.
    - throwawayqqq11 9mo ago
      Looking at GDP, the golden age is still right here. https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=US https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?location... /s
      - seehafer 9mo ago
        Though (very) unevenly distributed
      - CuriouslyC 9mo ago
        Different kind of gold raining down on us now though
mupuff1234 9mo ago
If I had to guess I'd say investors get their returns but non exec employees mostly get screwed.
- snarf21 9mo ago
  I was involved in a (obviously smaller) situation with an acquisition that went to a top consumer CPU maker (you can guess). The investors got nothing as the buyout money was used to fund new pivots in the existing company. So no options or shares were monetized and investors maintained their existing stake that had technically the save value, just most of the value was temporarily all cash. The only people to make out were the ones who went with the asset sale (retention bonus stuff) and the leadership that stayed (raises, etc.)
benjaminwootton 9mo ago
It’s yet another way for investors to screw early employees whose face doesn’t fit.
chaostheory 9mo ago
Is it related to the FTC’s “anti-monopoly” stance with Khan? It’s continue under the Trump admin since her successor supposedly approved of her work
BLACKCRAB 9mo ago
[dead]
exac 9mo ago
In my career I've seen startups "shut down" and lay off the NA team. I've seen venture capital acquire startups for essentially nothing laying off the entire product team aside from one DevOps engineer to keep everything running. I've seen startups go public and have their shares plummet to zero before the rank-and-file employees could sell any shares (but of course the executives were able to cash out immediately). I've seen startups acquired for essentially nothing from the lead investor. In none of these scenarios did any of the Engineers receive anything for their shares. Yet every day people negotiate comp where shares are valued as anything more than funny money.

lumost 9mo ago

I wonder if such deals will create employee lawsuits. I'd certainly be looking at legal options if I was one of the founding employees.

wmf 9mo ago
The employees are getting paid twice.
- sleepingreset 9mo ago
  wdym?
  - wmf 9mo ago
    They get a share of the $20B plus now they get to work for Nvidia.
- idiotsecant 9mo ago
  The employees are getting paid zero times.
  - petcat 9mo ago
    do they make a salary
    - simonh 9mo ago
      If part of their remuneration is in shares, they have a legitimate interest in the value of those shares.
    - crote 9mo ago
      Startups often pay a shitty salary in exchange for a decent chunk of stock options, with the implicit promise that you'll make bank if you work hard and make the company successful. Getting screwed out of your payout by such a totally-not-an-acquisition is wage theft. It's like promising a sales-related bonus at the beginning of the year, and then in December changing the metric to "AI-related sales to the CEO's golf buddies".
      - tgma 9mo ago
        The implicit promise is only partially true. Very rarely you can find a proven talent that will actually forego significant salary. Often time when that happens the person is close to founders and will have a significant role in shaping the startup and will get quasi-acquired too. This promise may have been more true before 2010s where public companies were not paying as much in liquid cash and private companies were not valued so aggressively. Fact is most employees take the startup offer because they don't actually have a liquid offer that's super competitive at that moment, or they are just kind of bored and taking a break of the corporate job that does not give them too many responsibilities, i.e. they are compensated via the title, not just the promise of making bank.
        lumost 9mo ago
        That just means you’re pulling from the lower end of the talent pool. There is nothing wrong with this, but usually talent is correlated with outcome. Most hot startups which are going places are near impossible to get into even for folks with good offers.
        tgma 9mo ago
        Your last sentence is not mutually exclusive with my statement. Both could be simultaneously true. The sheer number of big company employees compared to hot startup makes it hard for everyone good to get into the startup, especially considering they usually have more specific needs. That said it could also be the case that the hot startup cannot easily get good employees from big company. My point was more that the high end ones they do get are usually in the front piece of the airplane in the acquisition split. Also, the really hot startups are actually paying quite a bit of cash upfront so the original premise of employee sacrifice isn’t as true.
sandworm101 9mo ago
>> one of the founding employees If you were an employee, you were not a founder. A founding-employee would be someone who explicitly "invested" time/money into a company without compensation. If you are also an employee earning a wage you better have a written agreement stating what amount was "investment" and what amount was compensated wage.
- lumost 9mo ago
  Startups typically offer employees, particularly early employees, substantial equity compensation. If the employer is offering this compensation in bad faith, or otherwise preferring one equity holder over another without an explicit contract - then they are at the very least a crappy business partner. A founding engineer with a 2% stake could be missing out on 5-10 million of this transaction. As an aside, most founders are paid during the entire project. It’s not hard to raise a preseed round to get yourself paid for 6-24 months to work on an idea. If a founder chose to bootstrap - that’s all fine, but let’s not pretend that the employees aren’t taking massive career risks vs “standard” employers.
  - lovich 9mo ago
    > If the employer is offering this compensation in bad faith, or otherwise preferring one equity holder over another without an explicit contract - then they are at the very least a crappy business partner. I don’t know about you, but every company I’ve ever worked at is a shitty business partner if that’s the metric. The standard has always been I get what we agreed to if I was lucky, and otherwise I got full “I’ve altered the deal, pray I don’t alter further” and dared you to defend your rights. I actually have called their bluff a few times and gotten some money out of it, but it was always a year long event or more to resolution and involved risking even more money on lawyers.
- crote 9mo ago
  Just one slight problem: people need to eat, and food costs money. Your startup won't succeed when its founder starves to death. It's why the founder will usually get a bunch of cash during investment rounds [0]: they can't focus on the company if they are constantly worried about cash in their personal life. Unless the founder is already independently wealthy, it is a guarantee that they'll be employed by the company and being paid a living wage. Heck, in some countries this is even legally required! According to your logic, no successful startup will ever have a founder, as any form of pay instantly degrades them to regular employee, and any kind risk taken and below-market salary is completely irrelevant. Never mind the fact that they are taking home a minimum-wage salary while working 100 hours a week - they are earning a wage so they can't possibly be a founder. So if this logic already breaks down for the founder, why couldn't it also break down for early employees whose compensation is mostly in stock options? How is their situation any different from the founder's? [0]: https://www.stefantheard.com/silicon-valleys-best-kept-secret-founder-liquidity/ https://www.stefantheard.com/silicon-valleys-best-kept-secre...
sandworm101 9mo ago
>> one of the founding employees If you were an employee, you were not a founder. A founding-employee would be someone who explicitly "invested" uncompensated time/money into a company without compensation and also worked as an employee. If you are also an employee earning a wage you better have a written agreement stating what amount was "investment" and what amount was compensated wage.
- deleted 9mo ago
  [deleted]
SilverElfin 9mo ago
It should. Look at what happened at Windsurf when Google did something like this https://news.ycombinator.com/item?id=44673296 https://news.ycombinator.com/item?id=44673296

jbkkd 9mo ago

I have a friend who worked in a company that got "not acquired" in a similar deal. She didn't see a dime out of it, and was let off (together with a big chunk of people) within 6 months.

sigmoid10 9mo ago
As this gets more common, I think it will eventually lead to startups having a hard time attracting talent with lucrative equity compensation. It will be interesting to see how long it takes until this catches on among employees, but I already wouldn't take any positions in startups with a significant payment in equity anymore. The chances are slim that this pays out anyways, but now even when you are successful, noone will stop some megacorp from just buying the product and key employees and leaving everyone else with their stake in the dust.
- oblio 9mo ago
  With the job market being in the state it is in, there will always be people wanting to take their chances. Let's face it and accept that the golden days of people working in tech startup (and soon large companies) are over. RIP 1980 - 2023.
  - throwawayqqq11 9mo ago
    Looking at GDP, the golden age is still right here. https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=US https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?location... /s
    - seehafer 9mo ago
      Though (very) unevenly distributed
    - CuriouslyC 9mo ago
      Different kind of gold raining down on us now though

mupuff1234 9mo ago

If I had to guess I'd say investors get their returns but non exec employees mostly get screwed.

snarf21 9mo ago
I was involved in a (obviously smaller) situation with an acquisition that went to a top consumer CPU maker (you can guess). The investors got nothing as the buyout money was used to fund new pivots in the existing company. So no options or shares were monetized and investors maintained their existing stake that had technically the save value, just most of the value was temporarily all cash. The only people to make out were the ones who went with the asset sale (retention bonus stuff) and the leadership that stayed (raises, etc.)

benjaminwootton 9mo ago

It’s yet another way for investors to screw early employees whose face doesn’t fit.

chaostheory 9mo ago

Is it related to the FTC’s “anti-monopoly” stance with Khan? It’s continue under the Trump admin since her successor supposedly approved of her work

BLACKCRAB 9mo ago

[dead]

exac 9mo ago

In my career I've seen startups "shut down" and lay off the NA team. I've seen venture capital acquire startups for essentially nothing laying off the entire product team aside from one DevOps engineer to keep everything running. I've seen startups go public and have their shares plummet to zero before the rank-and-file employees could sell any shares (but of course the executives were able to cash out immediately). I've seen startups acquired for essentially nothing from the lead investor. In none of these scenarios did any of the Engineers receive anything for their shares. Yet every day people negotiate comp where shares are valued as anything more than funny money.