
Apple event overshadows unflattering news at Snapchat, Tinder - wmt
http://fortune.com/2014/09/09/apple-event-overshadows-bad-news-snapchat-tinder/
======
downandout
As a co-founder who got screwed on a large acquisition, it makes me happy to
see that Snapchat finally settled. However, a settlement doesn't change the
fact that Evan Spiegel really went out of his way to intentionally screw the
guy that actually invented Snapchat's model - and seemed to enjoy doing it.
He's definitely not someone I'd ever do business with.

[http://www.businessinsider.com/snapchat-lawsuit-video-
deposi...](http://www.businessinsider.com/snapchat-lawsuit-video-
depositions-2013-11)

~~~
mbesto
A few friends of mine saw Evan speak at Stanford this past spring. He was in a
room with Eric Schmidt and Sam Altman (IIRC) and his attitude towards them was
nothing short of smug. I don't remember the specifics of what he said but my
friends said he basically "told Eric, Sam and other prominent VCs on the panel
off because he thought he was more successful than them".

Take that for what it's worth.

~~~
cookiecaper
>Take that for what it's worth.

Which is nothing. We don't have the context and it's always amazing how
people, even just observers with no skin in the game, will have wildly
divergent interpretations of the same events. There's definitely some
interpretation going on here as Snapchat guy almost assuredly didn't say "I'm
more successful than you".

~~~
alelefant
You don't need expertise in a particular profession to come to the conclusion
that someone is being smug, rude, etc. If I saw someone on the street being
disrespectful, is it unfair for me to come to that conclusion because I don't
fully understand their field of work?

~~~
cookiecaper
I didn't say anything about the field of work, so I'm not sure what you're
getting at. We don't have the context of the conversation or panel in which
the supposedly dismissive and/or smug comments occurred and we don't have
enough information to make our own conclusion on the behavior or the
reliability of the assessment given here.

There are many reasons someone may feel that a speaker is smug. Some may be
warranted and some may not. Since we don't know what happened and can't
evaluate whether the parent's friends made a correct assessment or not, with
this type of matter, it's best to just ignore it entirely. It has nothing to
do with our familiarity with anyone's line of work.

~~~
alelefant
> with no skin in the game

I took that as referring to field expertise. If that wasn't the intent, my
mistake.

I get what you're saying, but there isn't video documentation of everything,
so at some point you take the words and recollections of others.

------
flurdy
I was going to link to the mandatory reading of Joel Spolsky's canonical
answer on splitting shares in startups between founders and beyond. But as
Stack Exchange's policy of shuttering less popular subsites that is now lost
in its original form :( It was originally here
[http://answers.onstartups.com/questions/6949/forming-a-
new-s...](http://answers.onstartups.com/questions/6949/forming-a-new-software-
startup-how-do-i-allocate-ownership-fairly/23326#23326) Is there a good
reproduction elsewhere?

~~~
dvdhsu
Found it copied here: [http://www.gravitycomputing.co.nz/joels-totally-fair-
method-...](http://www.gravitycomputing.co.nz/joels-totally-fair-method-to-
divide-up-the-ownership-of-any-startup/)

"""

This is such a common question here and elsewhere that I will attempt to write
the world’s most canonical answer to this question. Hopefully in the future
when someone on answers.onstartups asks how to split up the ownership of their
new company, you can simply point to this answer.

The most important principle: Fairness, and the perception of fairness, is
much more valuable than owning a large stake. Almost everything that can go
wrong in a startup will go wrong, and one of the biggest things that can go
wrong is huge, angry, shouting matches between the founders as to who worked
harder, who owns more, whose idea was it anyway, etc. That is why I would
always rather split a new company 50-50 with a friend than insist on owning
60% because “it was my idea,” or because “I was more experienced” or anything
else. Why? Because if I split the company 60-40, the company is going to fail
when we argue ourselves to death. And if you just say, “to heck with it, we
can NEVER figure out what the correct split is, so let’s just be pals and go
50-50,” you’ll stay friends and the company will survive.

Thus, I present you with Joel’s Totally Fair Method to Divide Up The Ownership
of Any Startup.

For simplicity sake, I’m going to start by assuming that you are not going to
raise venture capital and you are not going to have outside investors. Later,
I’ll explain how to deal with venture capital, but for now assume no
investors.

Also for simplicity sake, let’s temporarily assume that the founders all quit
their jobs and start working on the new company full time at the same time.
Later, I’ll explain how to deal with founders who do not start at the same
time.

Here’s the principle. As your company grows, you tend to add people in
“layers”.

The top layer is the first founder or founders. There may be 1, 2, 3, or more
of you, but you all start working about the same time, and you all take the
same risk… quitting your jobs to go work for a new and unproven company. The
second layer is the first real employees. By the time you hire this layer,
you’ve got cash coming in from somewhere (investors or customers–doesn’t
matter). These people didn’t take as much risk because they got a salary from
day one, and honestly, they didn’t start the company, they joined it as a job.
The third layer are later employees. By the time they joined the company, it
was going pretty well. For many companies, each “layer” will be approximately
one year long. By the time your company is big enough to sell to Google or go
public or whatever, you probably have about 6 layers: the founders and roughly
five layers of employees. Each successive layer is larger. There might be two
founders, five early employees in layer 2, 25 employees in layer 3, and 200
employees in layer 4. The later layers took less risk.

OK, now here’s how you use that information:

The founders should end up with about 50% of the company, total. Each of the
next five layers should end up with about 10% of the company, split equally
among everyone in the layer.

Example:

Two founders start the company. They each take 2500 shares. There are 5000
shares outstanding, so each founder owns half. They hire four employees in
year one. These four employees each take 250 shares. There are 6000 shares
outstanding. They hire another 20 employees in year two. Each one takes 50
shares. They get fewer shares because they took less risk, and they get 50
shares because we’re giving each layer 1000 shares to divide up. By the time
the company has six layers, you have given out 10,000 shares. Each founder
ends up owning 25%. Each employee layer owns 10% collectively. The earliest
employees who took the most risk own the most shares. Make sense? You don’t
have to follow this exact formula but the basic idea is that you set up
“stripes” of seniority, where the top stripe took the most risk and the bottom
stripe took the least, and each “stripe” shares an equal number of shares,
which magically gives employees more shares for joining early.

A slightly different way to use the stripes is for seniority. Your top stripe
is the founders, below that you reserve a whole stripe for the fancy CEO that
you recruited who insisted on owning 10%, the stripe below that is for the
early employees and also the top managers, etc. However you organize the
stripes, it should be simple and clear and easy to understand and not prone to
arguments.

Now that we have a fair system set out, there is one important principle. You
must have vesting.Preferably 4 or 5 years. Nobody earns their shares until
they’ve stayed with the company for a year. A good vesting schedule is 25% in
the first year, 2% each additional month. Otherwise your co-founder is going
to quit after three weeks and show up, 7 years later, claiming he owns 25% of
the company. It never makes sense to give anyone equity without vesting. This
is an extremely common mistake and it’s terrible when it happens. You have
these companies where 3 cofounders have been working day and night for five
years, and then you discover there’s some jerk that quit after two weeks and
he still thinks he owns 25% of the company for his two weeks of work.

Now, let me clear up some little things that often complicate the picture.

What happens if you raise an investment? The investment can come from
anywhere… an angel, a VC, or someone’s dad. Basically, the answer is simple:
the investment just dilutes everyone.

Using the example from above… we’re two founders, we gave ourselves 2500
shares each, so we each own 50%, and now we go to a VC and he offers to give
us a million dollars in exchange for 1/3rd of the company.

1/3rd of the company is 2500 shares. So you make another 2500 shares and give
them to the VC. He owns 1/3rd and you each own 1/3rd. That’s all there is to
it.

What happens if not all the early employees need to take a salary? A lot of
times you have one founder who has a little bit of money saved up, so she
decides to go without a salary for a while, while the other founder, who needs
the money, takes a salary. It is tempting just to give the founder who went
without pay more shares to make up for it. The trouble is that you can never
figure out the right amount of shares to give. This is just going to cause
conflicts. Don’t resolve these problems with shares.Instead, just keep a
ledger of how much you paid each of the founders, and if someone goes without
salary, give them an IOU. Later, when you have money, you’ll pay them back in
cash. In a few years when the money comes rolling in, or even after the first
VC investment, you can pay back each founder so that each founder has taken
exactly the same amount of salary from the company.

Shouldn’t I get more equity because it was my idea? No. Ideas are pretty much
worthless. It is not worth the arguments it would cause to pay someone in
equity for an idea. If one of you had the idea but you both quit your jobs and
started working at the same time, you should both get the same amount of
equity. Working on the company is what causes value, not thinking up some
crazy invention in the shower.

What if one of the founders doesn’t work full time on the company? Then
they’re not a founder. In my book nobody who is not working full time counts
as a founder. Anyone who holds on to their day job gets a salary or IOUs, but
not equity. If they hang onto that day job until the VC puts in funding and
then comes to work for the company full time, they didn’t take nearly as much
risk and they deserve to receive equity along with the first layer of
employees.

What if someone contributes equipment or other valuable goods (patents, domain
names, etc) to the company? Great. Pay for that in cash or IOUs, not shares.
Figure out the right price for that computer they brought with them, or their
clever word-processing patent, and give them an IOU to be paid off when you’re
doing well. Trying to buy things with equity at this early stage just creates
inequality, arguments, and unfairness.

How much should the investors own vs. the founders and employees? That depends
on market conditions. Realistically, if the investors end up owning more than
50%, the founders are going to feel like sharecroppers and lose motivation, so
good investors don’t get greedy that way. If the company can bootstrap without
investors, the founders and employees might end up owning 100% of the company.
Interestingly enough, the pressure is pretty strong to keep things balanced
between investors and founders/employees; an old rule of thumb was that at IPO
time (when you had hired all the employees and raised as much money as you
were going to raise) the investors would have 50% and the founders/employees
would have 50%, but with hot Internet companies in 2011, investors may end up
owning a lot less than 50%.

Conclusion

There is no one-size-fits-all solution to this problem, but anything you can
do to make it simple, transparent, straightforward, and, above-all, fair, will
make your company much more likely to be successful.

"""

~~~
sk5t
Good read, but the IOU plan is nonsensical... cash in one hand, or an IOU for
the same amount in the other, issued by an entity with a very high likelihood
of failure? What? Maybe if the IOU started accumulating 20% interest.

~~~
bmm6o
Sure, you'd want to be compensated for time and risk, but on the other hand
you don't want to saddle the company with a ton of debt. It depends on how
much money you're talking about. Either way, the point remains that it
shouldn't be paid for with equity.

------
crag
Money. Greed. It destroys more friendships (and marriages) than anything else.

So what's the lesson here? Don't be careless. I don't care what the idea
(startup) is - get the details on paper. True, 99% of startups fail, but you
don't want to be in that 1% that's making the lawyers rich.

~~~
at-fates-hands
>> Money. Greed. It destroys more friendships (and marriages) than anything
else.

This a thousand time.

My first hard earned rule of thumb? Don't do business with your friends. Lost
relationships, bitterness, and great financial loss is never worth it. I got
burned really bad and spent the better part of four years trying to get my
money back.

Since then, it's just something I live by.

~~~
gonzo
Friends? OK

But I've been in business with my spouse for over a decade now.

~~~
zavulon
That's different. Your spouse's and yours financial interests are most likely
aligned - you are both bringing in money to one family, so most likely there
are no arguments who gets how much. With friends, you and your friend are
competing for the same financial pie.

------
at-fates-hands
Interesting all the outrage about Whitney Wolfe and all the articles about her
and sexual harassment and sexism in tech while her case was going on.

Now she finally wins her case and its like a blip on the radar? Pretty sad if
you ask me.

------
tomp
Honestly, I don't see either of these as nothing but positive news (for the
companies, not necessarily for all the people involved).

~~~
maxbrown
They are probably long-term positive, but in the short-term they both could
provoke negative press for the companies.

------
dreamweapon
A beautiful way of saying, "We're sorry... but not _really_ sorry."

------
snoman
After the 3rd mention of Apple before the story intro was completed, in an
article that (by all appearances) isn't actually about Apple at all, I decided
that this just isn't a news source worth reading.

------
curiousDog
As a side note, is it still wise/advisable to join Snapchat as an engineer?
Particularly for Visa candidates whee the risk is higher?

~~~
dkfmn
The value of the company is already so high that much of the upside is
removed. You really have to believe in the company as a whole to make that
commitment.

~~~
shawabawa3
> You really have to believe in the company as a whole to make that commitment

Or just get a good salary/benefits/etc

~~~
untog
Somewhere like Google will likely pay better, though.

~~~
ilikemustard
And would be harder to get a job with, presumably. I would venture that it
would be much more difficult, but I'm simply speculating.

------
autism_hurts
Is there any interest in "this is how I got fucked" at a startup type article,
or is it so common that it doesn't matter?

I have an experience...

~~~
discardorama
> I have an experience...

I think we all do! ;-)

Back in the day, I was a co-founder in a company, started by my advisor's
wife. She called us (me and a colleague) to their house, and promised the two
of us 20% ownership (and the remaining 60% she kept).

I worked like a dog for about 1.5 years, spending nights and weekends getting
it off the ground (the business was website creation and other backend stuff).
We managed to get the ear of one of the largest grocery chains in the country,
and their VP came over to talk to us. My ideas were the core of the
presentation. As soon as it looked like it might take off, she started cutting
me out. Then one day, the locks were changed in the office!

As her husband was still my advisor, I couldn't do anything but grumble and
continue working on my dissertation.

A few years later, the company was sold for $30MM.

~~~
srj
Presumably you have your PhD now? Why not sue today?

~~~
discardorama
I thought about it after I graduated. The problem is: in the initial years,
people ask for recommendations from your advisor; and as a PhD, you are
basically tied to your advisor for life (people will always ask: who was your
advisor?).

After some thought, I decided to give it a rest and move on. I had learnt a
valuable (and very pricey) lesson: always take things in writing.

~~~
kelnos
I think I'd take 20% of $30MM, even including a potentially difficult court
battle, over a good rec from a PhD advisor (which, as others have pointed out,
is less important than you seem to suggest).

------
notastartup
From the headline, I thought that Apple had banned those two applications.

------
jedanbik
How is this Apple's fault? Slapping the big A on the headline seems like a
derail at best.

~~~
mikeyouse
Not Apple's fault per se, just the Silicon Valley equivalent of a "Friday
Night News Dump" that's common in industry and government.[1] It happened to
be Apple this time, but it could have just as easily been a Google
acquisition, some new Amazon product, basically anything guaranteed to get
most of the attention and press.

[1] -
[http://www.rff.org/Publications/Pages/PublicationDetails.asp...](http://www.rff.org/Publications/Pages/PublicationDetails.aspx?PublicationID=21671)

------
TaoloModisi
It's interesting the news on Tinder and Snap Chat came around the same time of
Apple’s new iPhones and iWatch release. In fact, it's no coincidence they must
have been trying to hide behind the noise.

~~~
nl
That's almost _exactly_ what the headline of the article says!?

~~~
k__
Maybe he wanted a discussion about, how apple news bury interesting news.
Instead of discussion how founders get screwed?

~~~
nl
Then post something interesting about it I guess.

It's pretty clear it happened. Is there anything else to say about it?

(Personally, I think the Tinder thing is more outrageous than the Snapchat
thing, and it was a bigger drama when it first surfaced.)

~~~
TaoloModisi
It was smart of them to release bad news at the same time as the apple
announcement. Not many have talked about the Tinder Issue and Snapchat’s
settlement, as a result.

------
compare
Seems a bit comical that the article claims this to be the first disappearing
photo app. I created and launched one myself a year before Snapchat started...

The normal way for start founders to receive equity, is only from one or more
of these 3 things:

\- For hours worked, based on the vesting and usually the hours must be beyond
the cliff or you get nothing.

\- If you built a crucial part of the IP that the company needs to buy from
you with equity.

\- Cash invested up front - less common.

He fulfilled none of those. Not even close to being a cofounder. Ideas aren't
included among those.

~~~
jacquesm
Gah I hate it when people delete comments and then repost them elsewhere in
the thread.

I wrote a longish answer to your comment here:

[https://news.ycombinator.com/item?id=8295469](https://news.ycombinator.com/item?id=8295469)

