
Jack Dorsey giving up 30% of his stake in Square to help underserved communities - richiezc
http://venturebeat.com/2015/10/14/jack-dorsey-is-giving-up-30-of-his-stake-in-square-to-help-underserved-communities/
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cowsandmilk
Since the article ends my mentioning Missouri, it is worth mentioning that his
cofounder Jim McKelvey used his Square success to found Cultivation Capital,
which is a VC focused on parts of the midwest often ignored by the coastal VCs
(e.g. Missouri, Indiana, Southern Illinois, etc.)

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100k
Can anyone who's been though an IPO comment on what happened to the early
employees with their 0.1% stake (of the original 10 million shares)? Everyone
understands that they'll get diluted with new rounds, but when I read that
Dorsey's giving away 40,000,000 shares I wonder what happened to the poor sap
who started with 10,000. Do companies typically issue more options or RSUs to
existing employees? How many?

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transitorykris
Dilution isn't the only possibility here. Stock splits also happen.

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100k
Thanks. I was wondering about that, but had never heard of a split in a
private company.

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tyre
It's more common than you think. I was an early engineer at ZenPayroll (now
Gusto) and they split the stock 10-to-1 in their last round.

As the company grows and the value of the stock goes up, it becomes difficult
to give granular stock options.

Rarely publicized because it doesn't mean anything. Owning 5/1000 shares or
50/10000 is the same.

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hkmurakami
The split definitely helps nudge a new hire to be happier with the offer, all
things, being equal, because many hires are still unknowledgeable about the
fact that the number of options is irrelevant (like you say), and there is
also the subconscious satisfaction of seeing big numbers next to our names
that is hard to fight.

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stpe
Updated title on original source: "Jack Dorsey is giving up at least 50% of
his stake in Square to help underserved communities"

 _Update: This post has been updated to correct that Dorsey will commit 10
percent of the entire company, not just his equity as previously stated. In
addition, our calculations were off and I regret the error._

This is commendable. Actually intending to making the world a better place (in
the non HBO-Silicon-Valley-Show-way).

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rco8786
Jack owns ~24% of the company. It is just his equity.

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flintchip
Yes, but 10% of 100% is a lot more than 10% of 24%.

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rco8786
It was reported that he would be giving up 30-50%(now _at least_ 50%
apparently) of his own stake. Which comes out around 10% of the entire
company, depending on what number is actually correct.

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_lex
Depending on how he does this and the basis of the equity, this move may be an
amazing tax shield, worth WAY more than it seems.

{edit} - I actually think this is exactly the strategy being applied by him
and his team of tax strategists - He's using this "donation" as a tax shield
and keeping the money in a foundation, which he can use to help "the
underprivileged" as he pleases, instead of just paying an amazing amount of
tax like Zuck did.

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murbard2
It's not a tax shield if you don't get to keep the money.

Of course, if you were going to donate anyway, then sure, it's more tax
efficient to give appreciated stocks. But calling it a tax shield makes it
sound like you can stand to gain personally by doing this.

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nmjohn
> But calling it a tax shield makes it sound like you can stand to gain
> personally by doing this.

One (with that much wealth) absolutely stands to gain a ton from it.

A family member of mine works in financial trusts / estate planning for multi-
millionaires (many times over) and this is one of the things I've heard from
them used to limit tax exposure while maximizing the most typical goal - not
personal wealth (these people have more money then they will ever be able to
spend, that isn't the concern for them) - but rather maximizing family wealth.

And once you're extremely wealthy, it's amazing how large your family becomes.

Essentially - many charitable foundations are absolutely charitable in their
fundamental mission, and best case are helping thousands of people with most
of the money directly helping - however what happens in practice, is this
foundation then has family members work for it earning somewhere between a
reasonable to a completely insane salary depending on any number of factors.

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murbard2
Sure, but the salary they draw from the charity will be taxed. It may be taxed
at a slightly lower rate than capital gains if they don't earn much, but not
extremely so.

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nmjohn
Not exactly - you've also got to consider the tax consequences on cashing out
directly so with the charity, the money only gets taxed once instead of twice.

Scenario a:

Bob starts Hooli - his stock is now worth 100 million. He wants to give half
to his family. He cashes it out and pays long term capital gains on it - at
15% he is left with 85 million. He pays out half to his relatives, but don't
forget, there is 35% gift tax when you gift someone more than ~15k So of that
42 million, only about 27 million will actually make it to it's intended
target.

Scenario b:

Instead of directly cashing out, he starts the foundation with the 100
million. (using that to offset his entire income that year with a charitable
tax deduction most likely). He wants to pay out half to his family still -
this time he is starting with 50 million which will similarly be taxed at
let's say 35% (income tax) - leaving 32.5 million to pay out. Also consider
the case where he exercised a large cash performance bonus upon cashing out,
that 5 million he will potentially not have to pay any taxes on either because
he was able to make a large tax deduction from his "charitable" gift to the
foundation.

It is not a simple thing - depending on how exactly the money flows, there are
ways to prevent a significant amount of double taxation. (Also a couple years
ago gift tax was 55% so it would have been 19 million (scenario a) vs. 32.5
million (scenario b) in post tax money. What makes things an order of
magnitude more complicated, is on top of all this one has to consider timing.
Tax rates change significantly all the time (55 vs 35% on gift tax in 2010 vs
2015) - some of which are known far in advance, some changes may be a surprise
- so in estate planning where the goal is to maintain wealth for many
generations to come - strategies like this start to make a lot of sense

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dclowd9901
I must be hugely cynical because my first thought was "what has this guy done
to commit so much to public benefit." There _is_ an unnatural or questionable
amount of money for people to give up isn't there?

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eric-hu
Jack Dorsey's net worth is approximately 2.4 billion [1]. Back when Bill Gates
stepped down as CEO of Microsoft, he did so not to retire, but to take on the
responsibility of spending his money in the best possible way for society. [2]

It's pretty easy to imagine a situation in which increasing your net worth
can't really earn you more to experience or nice things. I'd wager Dorsey's
already at that point, but maybe still wants to create things.

[1]
[https://en.wikipedia.org/wiki/Jack_Dorsey](https://en.wikipedia.org/wiki/Jack_Dorsey)

[2]
[http://money.cnn.com/2006/06/15/technology/microsoft_news/](http://money.cnn.com/2006/06/15/technology/microsoft_news/)

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humility
Does anyone else feel like it's the government's responsibility to help all
the needy sections of the society, and billionaires intervening only abets and
condones all the deliberate/unintentional mistakes of the former, and lets
them escape it?

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treerock
No. The assumption that government should fix everything is selfish and lazy.
It absolves us of personal responsibility, and gives us someone to blame when
things go wrong. I'd feel sorry for the politicians, except they do more than
anyone to perpetuate this.

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smtddr
_> >The assumption that government should fix everything is selfish and lazy.
It absolves us of personal responsibility._

It's also unreasonable to think everyone that's in a difficult situation got
there by their own mistakes and have the ability to get out without help.

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icebraining
I'm not sure that's what treerock meant, but I think it absolves us of the
personal responsibility _of helping others_.

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codingdave
My first reaction was that funding artists, musicians, and business is
probably not the greatest charitable good that can be done with his money...
but then I reconsidered -- It might not be the greatest good, but it is more
good than leaving the money in the bank. So... OK, I'll give it a mild thumbs
up.

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oldmanjay
Is there an honest belief that wealthy people keep their money sitting idle in
bank accounts? That would explain a lot of the hyperbolic language around the
politics of envy - it's a pretty easy (although nonsensical in reality) leap
to assume the wealthy accumulate money just to keep it out of the hands of
"the people."

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ScottBev
Part of helping underserved communities would be to move some of the business
outside the Valley and major metro areas. Find the mid to small cities and
spread the wealth.

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smtddr
...well, the line between spreading the wealth and gentrification is a bit
fuzzy.

I'm not convinced what's happening in SF, and starting to happen in Oakland,
is actually desirable by the residence that were there before tech people
showed up.

I think it's much better that Jack donates to help public schools, libraries,
arts & crafts, other recreational activities in underserved communities....
without sending the gentrification catalyst into them.

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curiousjorge
he should use that to save Twitter but good on him for getting his priority
straight and putting human lives over some glorified text publishing app that
gives the world an insight into our most mundane daily mental noise that we
otherwise would've never spewed if it wasn't for such social media platforms.

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arbitrage314
I no longer dislike Jack Dorsey! :)

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arbitrage314
Why did this comment get downvoted? Is it because other people like Jack
Dorsey, or because other people still don't like him? :)

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jsprogrammer
I'd prefer these announcements wait until the stake has been distributed.

I think it's been over a year since reddit said the community would receive a
10% stake in the company (or maybe it was just a direct payout of 10% of the
amount raised in a previous round). I haven't heard anything about it since.

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LunaSea
Are the "underserved communities" ex-Twitter employees ?

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butwhy
Yes, I'm sure the high tier engineers living in SF are very undeserved.

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SEJeff
The @TwitterOSS got really hammered by the layoffs. They were real people, not
just "high tier engineers". I take offense as some of my friends, real people,
lost their jobs.

You shouldn't make light of other people's misfortune.

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saryant
I had friends at Twitter OSS too and the ones I knew are pretty well poised to
do whatever they want at this point. They definitely are high tier engineers.

It sucks, one of them got me my job, but they're going to be in pretty high
demand.

