
Former Zoox employees sue, alleging rival offer was better than Amazon's - tempsy
https://www.reuters.com/article/us-zoox-lawsuit-idUSKBN25G2TB
======
supernova87a
For all the ire on this site about the likes of Google, Apple, etc. screwing
over the small company with their 30% app store fee, why isn't there even more
outrage over the founders and startups who screw over their even more
deserving-of-help employees?

You know, the employees who get subjected to unregulated dilution, tyrannical
bosses, unreasonable hours and unclear compensation for trading off the prime
years of their life? The ones who sign papers that look like an official
company that has rules and structures, only to find that it's really "whatever
the CEO wants to do"?

You would think people would be up in arms about that.

~~~
spurned_dev
Oh gonna need a throwaway for this one.

I had an exit interview where the founder told me their endgame was to destroy
the value of the company to buyback the equity they sold to investors. I've
never been more insulted in my life.

~~~
ideals
And you're still protecting them even after they admitted to fraud!

This is in response to someone saying we need to look out for each other. Our
fellow devs and employees.

Y'all need to stop being so nice. Your founder isn't. You need to stop trying
to _play fair_ , your founder isn't. You need to put the people you work with
on a higher level than your founder and get over this appeal to authority.

~~~
bobthepanda
Generally if you’re doing that, you want to make the first move, and you
probably don’t want the first move to be exposing yourself to a libel suit.

------
rsweeney21
The board of directors has a fiduciary duty to act in the best interest of ALL
stock holder EQUALLY.

The case law that established this was the Trados[1] case.

If your company issues a huge bonus to executives for completing a sale of the
company, you might have a case against the company. There are lawyers that
make a very good living taking cases like this on contingency. I'm sure that's
what these employees are doing in this case.

[1][https://corpgov.law.harvard.edu/2013/09/03/delaware-court-
of...](https://corpgov.law.harvard.edu/2013/09/03/delaware-court-of-chancery-
upholds-trados-transaction-as-entirely-fair/)

------
colordrops
Isn't it pretty common for early employees to be screwed down the line during
IPOs and acquisitions? That's been my experience and that of many colleagues,
and has been a topic here on HN over the years, driving the idea that working
for a startup is usually not in your interests except for particular cases.

~~~
throwearlyeng
I wish YC with all of its power and influence could try to change things for
the better here. Early employees' blood, sweat, and tears, not to mention
burning the midnight oil, often go into actualizing the founders' vision.
Often these key early hires are alongside the founders working equally hard
since day 10 or even day 1.

I remember Sam Altman posting lamenting that the most talented engineers are
more interested in working for FAANG than startups. If anybody could insist on
their portfolio companies' founders writing founding team friendly employment
contracts, it's him.

While I'm against wealth taxes on principle, I can certainly understand the
motivation for having them. I'm sure founders with fresh $100+M paychecks from
acquirers can spare a few $M for those that believed in their vision enough to
sacrifice the often-large opportunity cost of working for Google.

One of the reasons Woz is a personal hero of mine (alongside his engineering
brilliance) is that he made sure his colleagues who toiled in their garage
were treated fairly. When Jobs and Apple's investors didn't spare any would-be
lucrative Apple stock for said employees, Woz made sure to "give away" some of
his own to them. I'd argue Woz was still compensated quite lavishly after the
"damage".

In fact, any YC startup that is currently having trouble hiring engineers
might want to look into this. I would be interested in working for one that
gave me more than 1% of the pie (alongside the usual "VP of Engineering" title
that they always bestow to their first employee, which actually doesn't mean
anything at all) as a founding eng.

EDIT: Also kudos to Cruise, which is a YC company, for actually stepping in
and offering to make the founding employees whole.

~~~
wtvanhest
There are so many VCs now, and all of them are looking for an edge. There is
an obvious edge in building a term-sheet that creates a full ratchet for the
employee stock option plan at 10%, where each employee earns points toward the
total based on days worked, and 10-year exercise windows.

Then that VC needs to lead rounds and talk constantly about how the employees
and companies they fund have the best chance of an equitable exit for all. How
if you are not at one of their companies, you will almost definitely be
screwed through dilution and bad founder actions.

YC took VC from shareholder focus to founder focus. The next YC will balance
employee and founder interests in a way that delivers outsized outcomes the
way that YC delivered outsized outcomes for shareholders by understanding that
the founders were more important than getting an extra 1% or some other BS
term in the deal.

~~~
throwearlyeng
I'm just not sure how someone who is not already able to command lead
investor-ship through their reputation and added value would be able to sell
such a "short deal" to founders. YC can. Maybe they could demonstrate much
more effective recruiting.

~~~
wtvanhest
If you picture a cap table having 3 components

1) Investor's Share 2) Founder's Share 3) Employee's Share

Founders try to optimize for their own share, but investors basically destroy
the employee share to get founders to agree. I don't believe most founders are
sophisticated enough to model employee interests until it is too late.

My belief is that a new structure could be sold to founders by being a thought
leader. In a world with tons of money and no edge, I believe its worth it for
someone to try.

But... I'm not a VC, and personally believe its the most difficult gig in
investing (which investing is the most difficult gig in any job long-term).
So, take anything I say with a massive grain of salt.

------
gibolt
Would it matter? When presented options, they aren't required to choose the
best on a given metric. They can choose any, as long as the votes align.

Perhaps the founders believed their product would go further (not die) under
Amazon or that they stood to benefit more from stock rewards long term

~~~
MacsHeadroom
The board has a fiduciary duty to act in the interest of shareholders.

If the shareholders were not part of a vote, ie. the board voted, then the
board is potentially liable for damages.

~~~
WoahNoun
That is not true. It is a talking point that is repeated but has no bearing on
reality.

~~~
traek
It is absolutely true that the board has a fiduciary duty to shareholders, and
many states have statutes specifically protecting minority shareholder rights.
Delaware is fairly unfavorable to minority shareholders though.

~~~
alextheparrot
If you’re hired by a Delaware Corp as a California resident holding shares in
that company, wouldn’t the California rights be the ones the individual suing
would have?

Otherwise one state would have a monopoly based on it being business
friendl... oh wait, maybe that is the case.

~~~
trytozoom
In contracts that our lawyers gave us (and that we use) the state whose law
will govern the contract is specified. It's always Delaware.

The corporate charter, and the bylaws of the corporation are all explicitly
governed by Delaware law. These documents control what powers different share
classes have regarding corporate ownership and operation.

TLDR: Delaware law is almost certainly the controlling law regardless of where
the shareholder lives.

------
tempsy
employees probably got nothing from the actual sale given they had raised
$800M before the acquisition assuming standard liquidation preference terms,
so can’t really blame them

------
temporalparts
One important factor in deciding which buyer for a startup, especially for the
founders, is which company will most likely carry out the vision and mission
of the original startup.

For example, if the higher rival offer was from Yahoo/Verizon, then Amazon
almost assuredly the right choice.

This sucks for those employees though.

~~~
asdfaoeu
That would be fine if only the founders were shareholders but there are also
other shareholders.

------
mobileexpert
How would they possibly know the terms of either offer as former employees?

~~~
harikb
If they exercised their stock options before they left the company, they
receive all details (including executive comp). But they wouldn’t know what
the other offer was.

Btw this applies to those who are still employees too (if they explicitly
bought vested options)

My advice to anyone joining a startup - if you have the negotiating power,
insists that you must pre-exercise and purchase all options immediately when
you start your job. You must put some money, but if you don’t believe in the
company, why spent years there. Most companies don’t like this and their VC
will object. This is why I said “if you feel you have the power to ask that”.
If you can’t do that, exercise as soon as they vest

Edit: to clarify - this isn’t same as accelerated vesting. Vesting rules still
apply - but you become a shareholder with appropriate rights.

~~~
kelnos
It's my understanding that early exercise is mainly only useful for tax
purposes. You still won't be a shareholder until at least 1 share vests, which
for a new employee, likely won't be for a year. Is that incorrect?

~~~
eanzenberg
Also, you’re prepurchashing common shares. These are only worth money if the
sell price is over the valuation of the last raised round

~~~
chii
that's the risk of investing in equity. The employee needs to come to terms
with it - there's no situation where this risk can be mitigated (without
someone else taking a hit).

------
bpodgursky
> including employees who put in years at the company but left before May
> 2020. Zoox was founded in 2014.

I mean, I don't want to get into the legal side, or even the ethical side, but
on a practical note, former employees with stock should really expect to be at
the very bottom of the pecking chain here. If you leave and hold stock, you're
coming out in decent shape if you aren't completely screwed over.

Like, Amazon doesn't care about you -- you're not joining the company. The
startup doesn't care -- you've already left, there's no need to retain you.
Even your former coworkers likely don't give a shit; you're profiting off of
work they put in to get over the finish line (to paraphrase their thoughts).

You kind of have to be on the rocket when it reaches orbit, to get the payout.
I dunno what they're trying to accomplish other than make a few quick bucks to
make them go away.

~~~
tedivm
On the practical side breaking the law doesn't always work though.
Shareholders are owners, and regardless of how they got their shares (vesting,
purchase, gift, poker game) there are rights that go along with that.

~~~
bpodgursky
Sure, the right to get paid out the same as all other common shareholders.

But will the company structure an acquisition so more of the payout is golden
handcuffs than equity payout, if it's better for retention? Well, yes.

~~~
yibg
Following this logic, all acquisition should have 0 cash, with what would've
been the money for the acquisition going to retention bonuses instead.

This is definitely better for retention, and the share holders that aren't
working there anymore? Well they aren't working there anymore so have nothing
more to contribute right?

