Windsurf employee #2: I was given a payout of only 1% what my shares where worth

Work for good people with a history of moral dealing. A family member just had a life-changing payout because leadership was generous. A friend walked away from a company pre-pivot without equity for what became one of the decade's biggest acquisitions.

This stuff is lottery tickets, but real ones. You need to be smart about who you make your limited bets on.

And agreed, big cautionary note here shows that Windsurf having "founder-friendly" investors does NOT mean employee-friendly ones.

The only good reasons to do so are if you want to learn or make contacts so that you can found your own startup later.

In my pensive moments, one of the things about humans that makes me go "god damn" is how little money it takes for insanely talented people to just come and work for you.

Hey, at least he’s taking his LARPing as a douchebag ceo seriously. Easy vip invite for DND nights.

I had the option to sell some equity recently but it would have only been like $16K USD so I held... I had about $9K taken out of my salary to pay for those so it doesn't make sense to sell given the massive growth the app and not that much dilution... The financial gain barely covers the inflation.

It feels like both revenue and profits have been kept artificially low. $6.5 million per year revenue, still growing steadily, with a loyal customer base with 10% profit seems really good... A valuation of $8 million seems ridiculously low... Not even 2x revenue, for a tech platform with good lock-in factor (they sell a lot of licenses to schools)!

It's kind of amazing how bad a deal it is to work for someone else as an employee. Even if the founder is good and generous in many ways and the business side (which you have little control over as a developer) happens to work out pretty well, they can still pull all sorts of levers to make the deal bad. With this one, I'm going to wait it out 20 years if I must. A lot of the game is just timing, you gotta wait it out, sell at the top... Some people see a peak opportunity to cash-in multiple times in their lives, some people never see it! In my case, I haven't seen the top yet.

I never had any opportunity to make serious money ever. Never had an opportunity to pull the trigger and make even $100K. The best I ever got was in crypto, my crypto was worth $100K but I was earning like 100% annual yield and required a 1-month unlock period. So I made more than that by holding it for 3 years anyway...

I think my career story so far is quite interesting. Probably more interesting than 99% of the classic SV startup stories (at least what they say publicly). I've done some things nobody else has done. Made money in truly adverse environments where a lot of people hated my guts. I've seen people behave in strange ways. At times, I felt like I was almost breaking through the membrane of 'the matrix'; almost transcending my social class. But all I got for it was 3 years of passive income. I never had the opportunity to cash out big.

It's tough out there, so tough, it often feels fake/artificial. Often, it feels like you have to be 'chosen' and that's all that matters. Your work doesn't matter, how talented you are doesn't matter, how lucky you get doesn't matter (besides the luck of 'being chosen').

At the end of the day, money is like a river and people upstream from you get to decide whether or not the river will flow in your direction. When you understand that new money is created constantly and, just like the river, the water cycles between the mountain and the sea, you start to understand the value of positioning and 'being selected'. The people upstream will keep telling you that they don't control the flow of money; that the river flows naturally through the lowest valleys... It's your job to put yourself in that low valley... But really, they've built massive dams up there directing the water almost arbitrarily. You may be at the lowest valley but they're redirecting the water elsewhere artificially because it suits them better. Reality is that they can easily alter the path of the river anywhere they want and it has little to do with 'building something people want'. It's about building something the people upstream want... And sometimes they just want to help their existing friends; unfortunate for you if you are not their friend.

It's a catch-22; you need rich friends to get money but you need money to get rich friends. But I suspect it's way easier for a poor person to get rich by befriending a rich person than it is for a poor person to get rich without rich friends. The second approach feels like you're piercing through 'the matrix' because of all the weird almost conspiratorial resistance you might get (tech feels like one big club).

Sometimes you might accumulate some dirt on some rich people and that gives you some leverage over them but it's the kind of leverage where you have to keep coming back to them to get crumbs. I feel like you can never break through that way due to regulatory capture. You can only do limited damage to them and it's always costly to you. They still have the balance of power.

Not very good incentive or compensation, if you have to value it at $0.

the much bigger motivation is "keep the company afloat so i can keep drawing my salary", so just boring old non-equity paychecks provide plenty of motivation.

if you're an employee that thinks your contributions are so great that you are single-handedly juicing the stock price or valuation, you're probably wrong but if not... you should probably take those skills and found your own startup.

Well, yes, because that’s insane.

"Wanted to hire me" as in they made an offer, or an earlier step? At offer stage, I've never had a company refuse to answer these questions. I don't have "dozens of companies" worth of experience though, maybe one dozen if that.

Those questions are certainly worth asking but employees should also keep in mind that even if they do share that information your equity can still later be diluted away to worthlessness.

Options go to zero much more often.

So you're working at this startup. Lets say it's worth $10 million. To make things simple, in this company, there are 2 people, the fucker, the CEO, the guy that started it all. He holds 90,000 RSUs, each worth $100, so $9 million, and the fuckee, you, who holds 10,000 RSUs, each worth $100, for a cool million.

Here's where the fucker fucks the fuckee, ie you. The company does a round, and then creates, out of thin air, a billion shares (1,000,000,000), and issues them to the new investors. Lets say the company reached unicorn status this round, which is to say a valuation of a billion.

Holy hell a billion! But wait now there's 1,000,100,000 total shares out there, and the valuation of a billion, divided by the new shares, means that each share, of which you only have 10,000 of, is now worth just under one dollar.

That's right, your $1 million just turned into $10,000. Which isn't nothing, I'd love to come across a random $10k I didn't know I had. But that's just, like, one really nice vacation for you and the kids, which you haven't seen enough of because you've been working so hard at this startup, and not, like, a college fund for the kid that's showing aptitude at engineering and that you were hoping was gonna go to MIT.

Dilution is inevitable, there's no avoiding it. The scenario I presented is just to show you an example of how dilution fucks you. If things go well, would you rather have 10% of $1 million or 0.1% of $1 billion?

For more, it depends on how you like your information. ChatGPT's got stuff like ISOs vs NSOs pretty well covered, Investopedia's got a lot of good stuff if you'd rather it that way.

They offered to sell me more shares

I countered that I'd been trying to dump the shares they already gave me and if the shares are truly worth X dollars they should buy them back from me

Anyway glad I quit

I always take more equity. I wouldn't work for you in the first place if I didn't believe in your equity.

Sure, if you don't want to take a risk then look for a higher salary, and probably at a more established company because even if you have mostly salary and little equity a startup is still risky (and you're making it even more so by putting cash pressure on the company at that stage).

On the other hand, if you want a chance at a bigger payout, you'll want more equity. And yes, you may well not get that payout.

It seems like you're saying: if you choose to work for a startup rather than a bigger company, it must be because you think their equity is valuable, so you should prefer to take more of your pay in the form of equity if you can.

But there are plenty of other reasons for choosing to work at a startup.

You might have chosen to work at that particular startup because the work interests you. You might prefer startups to bigger companies because they have less bureaucracy and can do (some) things faster. You might prefer startups to bigger companies because there are fewer layers of management above you and so you have a better view of why you're doing what you're doing.

Even if you're only in it for the money, I don't think your argument is valid, though this is more of a nitpick: it might happen that a startup particularly wants you or at least your skillset and is willing to pay more for it than any bigger company you've found. You might think the startup is likely to fail, but still prefer being paid twice as much. (This is kinda nitpicky because I don't think this situation is super-common, unlike the other ones I mentioned above.)

This is why you would never see an early stage investor invest in only one company. They need volume to be able to survive the high risk/high reward nature of startup investing.

Now, maybe you think you are a better judge of the probability of success for your startup than an investor, so the risk is lower. You would be wrong; if there was a way to reliably predict which startup would hit it big, then investors (who spend all their time trying to predict exactly that, and have a lot more data and history to use in their evaluation than you do as an employee) would have a much higher success rate.

So even if you have a very promising startup, your equity is a huge risk. Your company probably won’t hit it big, and if it does you have to hope you aren’t screwed out of your equity by the millions of tricks they use to screw employee shareholders; dilution, preferred shares, etc.

Even worse, you are taking double risk. Your startup is risking both your equity AND your salary. You want to diversify your risk, so you can use your investment when your salary fails and use your salary when your investment fails. In this case, those both will fail together if your company doesn’t make it.

Look, equity and stock options are great, but you REALLY have to discount its value as an employee because of the way the risk shakes out as an employee.

I know a few people who did well working for unicorns, but that isn't most startups, and pretending that any given startup will be one is selling yourself short.

yes that's literally the definition of expectation value...... so

    ev = 1 bagillion * 0.0000000000000001 = ~0

There's very few currencies in the world in which 1M isn't enough to retire. USD isn't one of them.

Who is gonna want to work at a startup in a non-founder role after this and Scale AI?

This continuing degradation of, and flagrant disregard for social norms is destructive for society.

that matches my experience working at 2 non-public venture funded companies.

But so did he keep the shares or take the payout? Is the 1% payout an accurate reflection of Windsurf's value after having lost so many valuable employees? And why didn't he take the Google job? Was the 1% contingent on taking the Google job? But how could it be, since Google doesn't own Windsurf/Cognition? But if it did somehow, did it have a higher paycheck to compensate? Or was it contingent on staying at Windsurf/Cognition?

This thing needs an in-depth blog post analysis. The tweet by itself isn't providing even close to the information necessary to understand what's actually going on.

If I join a lottery syndicate and it wins 100m but I only put in 1% of the syndicate amount say $100 do I not deserve $1m because I'm just a "whatever I am just"???

No one is saying this.

There is no question that the Windsurf and Scale AI ploys effectively left employees with ownership in the company high and dry.

> but how much do you think you deserve as an employee

You deserve what you are promised. If a founder says you will get rich if the company goes to the moon, and they instead do some strange maneuver so only they cash out, the founder is a scumbag.

You are acting like early startup employees risk nothing working for a startup, and invest nothing of their own. Again, that is a weird assumption.

Yeah, the hours can be crazy but not too often. Yes, you're expected to give your best all the time but that's part of the fun. And the best part is the challenges are always interesting.

Maybe it makes it easier for me that I'm not at all interested in normal family life and never want to have kids.

Fiduciary duty is very low bar. Management has to act in the best interests of The Company, as in, as a whole. The company != #2. Lawyers are not taking this case.

I'm certain the accounting was done properly, maybe even by a Perl script, and this is how it penciled out. The question for us stiffs is what can we learn from it?

https://www.youtube.com/watch?v=e_FWUW6SnDo

Was this a scenario where he lost them because some sort of “cause” event occurred, like leaving to work for a competitor? I can’t imagine that would even be valid under CA law?

I’m not even sure who was forcing him to forfeit his shares…

This is indeed venture capital risk, but this case lays bare the exorbitant amount of risk for investing in these types of companies--perhaps especially in California?

The only thing that changed recently is the "unicorns" stopped happening altogether.

So, startup base compensation hasn't kept up, and the career and financial risk of working for one has gone up due to higher interest rate and higher open-market asset prices.