
What happens when you sell your startup? - gk1
https://techcrunch.com/2017/11/07/what-happens-when-you-sell-your-startup/
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hinkley
He forgot the part where some of the executive team is offered a big payout
for retaining employees for a period of time. At which point they at
incentivized to straight up lie about how great it is to be bought and sold
like cattle. That sweet, sweet stock vesting will make it worthwhile. And then
it never quite seems to work out, but the horror only settles in after they
get theirs.

Man, do I have some latent resentment...

~~~
Waterluvian
I respect and trust my founders, but I also believe The Machine can corrupt
amd manipulate anyone. At a certain point I wrote off all my stock options as
a free lottery ticket, and have valued them at $0 in my big picture life
ledger. I work for a combination of money today and love for what I do, but
not for the promise of ritches one day.

There's always a chance I'm being foolish or paranoid, but this approach is
the safest.

~~~
logicallee
You don't really value them at $0. Shoot me an email and I'll send you a
binding contract saying you'll transfer them to me for $100 paid now.

Hey, that's $100 for free! Only it shows you don't really value them at zero.
It's only a slightly smaller lie than founders who insist their startup is
worth hundreds of millions.

The truth is somewhere betweem the two...

~~~
jerf
"I value them at zero" is shorthand for "I am not planning my life around them
having any value, such as buying a house with a mortgage so large that the
only way I can pay it is for those stock options to be worth something
significant." Yeah, technically that's not what it means _exactly_ , but when
you're making your life plans as if them cashing out at $0 is the most likely
outcome, it's not _entirely_ wrong either.

~~~
Waterluvian
Exactly. In my head I like having the free lottery ticket more than having
$100. But in my ledger they are not present as an asset.

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cardine
There is also a third option for making money with a startup: To get your
startup profitable without selling or going public.

~~~
jdavis703
What's the point of that? If you're an employee with stock options you aren't
going to see a dime of the profits. You need an IPO or acquisition to make all
those extra overtime stock options pay off.

~~~
adventured
See: the SAS Institute model of profit sharing, which they began shortly after
forming the business. It has endured in an extremely successful manner for
four decades as SAS has remained private.

To put this into context. Facebook will likely hit ~$17 billion in profit for
fiscal 2017. They have 20,000 employees. If their only obligation was to
employees as owners, they could very safely distribute half a million dollars
per year perpetually to every one of their employees (while distributing
billions to the early shareholders). This model would have vastly outperformed
the IPO model as far as the VC firms are concerned (specifically as far as
their institutional capital suppliers are concerned). Most VC investment gets
liquidated early on, shortly after the IPO (the same happened with Google,
most of the early backers bailed not long after the IPO, or their returns to
date would be comically higher; Peter Thiel made the same choice with his
Facebook position, selling a lot of it early after the IPO).

~~~
golergka
It's only better in hindsight, with a prior knowledge that Facebook is a mega-
unicorn.

But VCs make decisions with limited information, based on probabilities, and
in this case going for an earlier payout via IPO or selling the company is a
more rational option.

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dvt
> Unless you’re one of the lucky few who start and take a company public in an
> IPO

Not like I have much to draw on, but to me it seems that a huge acquisition is
probably more bang for your buck than going public (which is by definition a
gamble).

I don't think I'd ever want to be the CEO of a Fortune 500 company. Being at
the whims of finicky investors on top of shady market forces 24/7 just seems
awful when compared to getting acquired for a pretty penny (WhatsApp or Tumblr
come to mind).

~~~
matt_wulfeck
I would say for the median engineer, a buyout is better because valuable
employees will be put on a retainer, which is where the real money is for the
little guys.

~~~
dvt
True, but I meant as a founder.

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saluki
@DHH thoughts on selling your startup
[https://www.youtube.com/watch?v=0CDXJ6bMkMY&feature=youtu.be...](https://www.youtube.com/watch?v=0CDXJ6bMkMY&feature=youtu.be&t=15m55s)

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sds111
The buyers rarely understand what they are getting. Because of that they will
use different marketing approaches and customer service. The good buyers will
be lucky to keep 50% of the customers. Other buyers may decide to take the
idea and tangibles such as domain names, and rebuild from scratch. In either
case it sure is hard watching your baby get sold off and changed.

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rsp1984
How likely is it though that the board would have accepted the deal in a real
scenario? The VC returns in the example aren't exactly home runs. Wouldn't
they be incentivized to block the deal and wait for a better one?

~~~
gedrap
I guess quite likely? In this scenario, it sounds like the goal of Series C
was just to get some, any return. And getting back your initial investment
sure sounds better than getting nothing back.

~~~
moxious
I doubt that was the goal of series C as any investor in that round would have
been throwing good money after bad. If you're the VC in that case you're
probably better off investing in a growth operation that trying to salvage a
previous bet

