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Investor to Airbnb CEO: you want liquidity, make it available to everyone (2011) (techcrunch.com)
63 points by kornish 255 days ago | hide | past | web | 17 comments | favorite

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).

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

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? :)

Haha that's hilarious!

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

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.

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

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.

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.

I think the weird metaphor is that by being at arms length, you can fit a lot more people in the group hug, and that's good for attracting (and retaining) top talent.

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.

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.

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.

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.

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

In the end they raised 1B of private equity.

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

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

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