
Investor to Airbnb CEO: you want liquidity, make it available to everyone (2011) - kornish
https://techcrunch.com/2011/10/01/chamath-palihapitiya-airbnb-liquidity-everyone/
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throwaway6497
Respect to Chamath! I am disappointed there hasn't been much discussion in the
community around why AirBnB founders did this. Is @sama in support of this
wheeling and dealing in general. I am pretty sure he is not. What is YC's
official stand and ethos around cashing out by founders without providing the
same kind of liquidity to employees. Since AirBnB has been successful beyond
anyone's wildest imaginations this event was either forgotten or didn't really
make for a bad PR. We don't need for things to fail spectacularly before we do
what is right.

I see YC and YC community in general bringing more transparency and fairness
to the way startups are built and run. They need to set the tone and tenor
about what is right and acceptable. I am looking forward to see constructive
debate around this topic in the comments (or not, if I am totally off the mark
here).

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sebleon
Why hide behind a throwaway account? Seems like a genuine, thoughtful
response.

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throwaway6497
I have built quite a bit of karma on this account and using it as my default
id now. Also, what matters is the value of ideas not who it is coming from -
right? :)

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sebleon
Haha that's hilarious!

True, but typically using throwaways has some weird connotations. Glad you're
changing its meaning!

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ThrustVectoring
It reminds me of an idea I've had kicking around. Basically, instead of the
founders holding equity directly, they set up a trust that holds the non-
investment positions and pays things out proportionally. The point is to
basically have equity, but prevent individual exercise - if the founder wants
to cash out, the only way to do so is to dump cash into the bonus pool.
Important note would be to distribute the trust's assets when the company
becomes fully liquid (acquisition, IPO + exercise window expired, etc).

It makes a lot of sense from a game-theoretic perspective, but I don't know
what the tax implications would be. Like, I know that a very minor equity
position will often give little-to-no negotiation power when the distribution
of the company's riches gets decided. I'd much rather ride along on the
founder's coattails. As it stands, I have to ask what sort of equity position
the founders get and make sure it's the same, and run into complex issues when
leaving the company, etc. Much easier for me to understand is "when the
founder gets a million dollars, you get a thousand" or the like.

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late2part
This is a very strange idea. You start a company and you're arm's length to
enjoy the benefit?

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ThrustVectoring
Game theory is strange. Gaining an option to do something can be negative
value, because it affects what other people expect you to do in future
situations (and because other people now have an incentive to coerce you into
exercising that option).

Given that I don't want to screw over my employees, I'd rather have legal
structures set up so that I can't. Furthermore, I'd prefer this system to be
extraordinarily obvious, so that it's clear to everyone that I've committed
myself to a course of action. Like, how you win a game of chicken is by
removing the steering wheel from your car, waving it out the window, and
yelling that you _can 't_ turn away. You'd don't keep the ability to swerve
just because you might think you'll need it.

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dlubarov
Couldn't the founders just give themselves common stock with similar terms
(including non-transferability) as employees' RSUs? I don't see the need for a
trust.

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payne92
I am generally supportive of founders taking some money off the table, but not
so much that they necessarily get post economic. When a founder ends up with
such a concentrated position, I think it is reasonable for them to diversify.

BUT, I think the criticism here is absolutely justified. It should not have
been done as a common stock dividend using new investor money. If a founder
wants money now, they should give up a proportionate right to money later.

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djyaz1200
As a committed founder your entire life is wrapped up in your company, not
just your career but to an extent your health, your relationships and your
family all depend on this one bet paying off. ...and more frequently it's
taking even the most successful startups nearly a decade to reach an
IPO/liquidity. Talented employees hired at full market value have a lot less
lock in/risk and a much lower switching cost than founders. Also investors
place many bets and don't live and die with each of them. As the founder you
have one big bet, and setting aside the wreckage that can create in a founders
life... it also can encourage them to make overly cautious decisions that
aren't aligned with the investor's and employee's long term interests. Taking
a reasonable amount of money off the table to take care of your family and
have some security is perfectly reasonable.

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AndrewKemendo
What number is "a reasonable amount?"

Do you think he would have thrown the red flag had it been significantly less
than 21M?

Seems that it wasn't that they were taking money off the table it was how it
was structured.

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jasonlaramburu
The value of his stake would have increased 30x in 6 years had he invested. On
a $1m investment that would have more than covered what the founders took off
the table. I wonder if he regrets passing.

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pdog
Did they reconsider declaring a special dividend on the common stock as part
of the $112M Series B funding round?

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horsecaptin
In the end they raised 1B of private equity.

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throwaway6497
Did the founders cash out and left the employees in the dark about it?

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horsecaptin
No idea - I'd like to think they have plenty of skin in the game still.

