Engineers: always negotiate for higher base salaries. In the vast majority of cases—especially during acquihires—your equity will be worth little or nothing. Founders and VCs still get paid; employees rarely do.
Don't just accept promises. Ask for the 409A valuation, liquidation preferences, and pay bands. If a company won’t provide transparency, that’s your signal.
Equity is a lottery ticket. Salary is money in the bank.
djoldman · 52m ago
Indeed. Likewise with non-guaranteed bonuses (gotta love the "plus a discretionary bonus!" commentary during offer discussions).
It's always worth offering to take equity as long as they agree in writing to not ever dilute your shares and vest them immediately. However, it's unlikely that any company will agree.
It's best to imagine compensation as exactly one's salary. Then (virtually) all surprises are good.
Yes, maximize cash and use it to acquire a diversified portfolio.
gsibble · 1h ago
I've tried to ask dozens of companies that wanted to hire me just for how many shares were outstanding and/or authorized. They almost always refused to share.
You can almost never get any info on equity until it's too late and you realize it's worth nothing.
georgemcbay · 1h ago
> I've tried to ask dozens of companies that wanted to hire me just for how many shares were outstanding and/or authorized.
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.
There's many opportunities for VCs and founders to screw you over. And that's assuming things go well enough for that to be an option lol
gsibble · 2h ago
I tell every engineer always to maximize their cash comp and every founder and investor always says "No, that's such a bad idea! Get more equity!"
Yeah, because that is in your interests, not the engineer's.
CalChris · 10m ago
There is another variable. Find better companies to work for. If you don't think this is a unicorn, don't work for them. If this is another stablecoin startup leveraging quantum AI then you deserve what you get, cash comp or no.
usaar333 · 40m ago
Not everything is adversarial. More cash pressure on the company itself can be bad for the company which is bad for you too.
I always take more equity. I wouldn't work for you in the first place if I didn't believe in your equity.
01HNNWZ0MV43FF · 1h ago
I remember when my old employer was doing another round of funding
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
tensor · 28m ago
There are more than enough stories about employees complaining that they didn't get a big enough payout on an acquisition or IPO to know that this isn't true. It all comes down to your risk reward preference.
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.
tedivm · 23m ago
> There are more than enough stories about employees complaining that they didn't get a big enough payout on an acquisition or IPO to know that this isn't true.
That's exactly why it is true. If every person who held early stage stock walked out of those events happy then no one would recommend they focus on salary.
usaar333 · 45m ago
Under any normal circumstance I've ever seen, you should be taking the higher equity/lower salary combination and should focus on equity rather than salary.
The only time it ever makes sense to push for more salary instead is if you literally cannot get a job at a public company (or even a near IPO unicorn). Plenty of startup employees can, so clearly they believe their startup equity is worth something.
Financially speaking, startup equity is actually worth a lot as an employee (https://www.amafinance.org/startup_comp/). Yah, over 50% it's going nowhere but expectation needs to consider how huge the win is even if it is lower probability.
almostgotcaught · 36m ago
> Yah, over 50% it's going nowhere but expectation needs to consider how huge the win is even if it is lower probability.
yes that's literally the definition of expectation value...... so
ev = 1 bagillion * 0.0000000000000001 = ~0
hence you should absolutely not be taking higher equity/lower salary ever. hell i wouldn't even take that at a publically traded company if given the option.
doctorpangloss · 31m ago
The interesting thing going on is, stars align. The kind of person who has to think about this problem should take equity. The kind of person who would choose to take cash isn't going to be hired at the kind of VC backed business that will end up being worth something.
Dayshine · 14m ago
Yes, a company will do very well if it fills itself with naive employees who think that if they work insane hours and sacrifice their life for equity (which they'll never get an exit event for) will do very well.
Even if the OP considers the full headline number of $2.4b to be the value of the company, and taking his "1% of fair" number as truth, seven figure payouts would imply all 40 founding engineers had >4% equity which is nonsensical.
b_be_building · 17m ago
No, what Garry is saying DIRECTLY correlates with the outlined opportunity.
For his assertion to be right, 40 people need to get paid out at least 1 million. That's 1.67% of the company or 0.04% evenly. Its not hard for me to image that up to 10% of this cap table was distributed among the 40 people.
reducesuffering · 14m ago
Hilarious that the best case positive spin highlighted is 40 people cleared at least $1m, so $40m out of $2.4 billion and $240m funding. He's praising "look 2% of the payout went to people in the company".
Nevermind that $1m over ~4 years is approximately the same as the differential other public tech co's pay. ($150k + equity at YC co, $350k TC at G/Amzn/FB/Uber/etc.) So when they tell everyone they should work at YC co's, they're saying they're proud when in the absolute best case scenario you make just as much as at the public co's they rail against working for.
If you want to come across as genuine, directly say how much % of the payout went to employees that weren't the founders. They won't, because it's likely 3%, which correctly sounds horrible
ohdeargodno · 1h ago
Garry Tan's job is bullshitting. Lying isn't very far from it, and he even covers his ass with "I heard".
Who did you hear it from Garry, the founder that made out with all the money ? Or the other VC that made a few hundred million from the sale and stands to gain even more if the lie of "founding engineers get rewarded" is perpetuated?
KaiserPro · 3h ago
I was aquihired by a FAANG.
The headline "startup bought for x million" is almost always a lie, either direct or by omission.
First, when a startup is bought, its generally not bought at the headline rate. So if you see a "bought for $45m" that doesn't mean People who own shares all got a % of 45m.
That number is normally bullshit, but also a "total package" which include share offers for joining the new company.
This means you will get say 1% of the headline buyout now, and then golden handcuffs to get the rest.
Also, it makes no sense to give employees that much money upfront. After all, if I'd been given $1m in one go, I wouldn't be fucking working now.
kentonv · 1h ago
Yeah, I used to hear all the time that "a startup is worth $1 million per engineer in a pure acquihire", but learned the hard way this is a myth.
When we were talking to various companies about acquiring Sandstorm.io (my startup) in 2017, one of the companies told me, essentially: "We aren't interested in your IP, only the employees. We'll give you a set of job offers for them. We will then sum up the salary and equity grants from these offers, and call that the acquisition price. If you want to take some of that money and redirect it to your investors instead, that is up to you."
I was a bit taken aback. Obviously I wasn't about to take a cut of my employees' future comp and give it to investors.
Instead we ended up going to Cloudflare, but not as an acquisition. Cloudflare told us very honestly that they couldn't justify buying the IP, but they would be willing to acquire the company for $0 to wind it down for us. I decided to just take the job offers but keep the company independent as an open source side project, thinking maybe I'd revive it eventually. Turned out to be a mistake as some guy who was mad we didn't hire him sued Sandstorm six months later, and that was then my problem instead of Cloudflare's, oops. Should have sold for $0.
(Once it became clear to the plaintiff('s lawyer) that we weren't going to settle, they stopped pushing the case forward, but didn't drop it, so it just sat in limbo for 5 years before the judge finally threw it out it 2022. Meanwhile I couldn't dissolve the company and had to keep filing taxes for it. Ugh... lessons learned.)
swyx · 1h ago
sorry that happened to you. what taxes do you have to pay on a company making 0? just delaware franchise tax?
kentonv · 54m ago
That and $800 CA franchise tax. But the money wasn't really significant. It was just annoying to have to prepare the returns every year.
kingforaday · 1h ago
Whoa, bummer but interesting. It can be hard to let go. Thanks for sharing.
sokoloff · 25m ago
$1M in one shot leaves you with around $600K after taxes in most states. That’s enough to pay you around $24-30k/yr.
Unless you already had several other million saved already, I bet you’d be working again.
bagels · 2h ago
1m isn't enough to really retire in in silicon valley
loire280 · 2h ago
Sure, but if you're 10+ years into your career and have been financially conservative (i.e. have a positive net worth), a lump sum of $1m could be enough to retire to a lower-cost location.
andrewmcwatters · 2h ago
Hell, roughly $600,000-800,000 is enough to lean FIRE, the last time I checked.
quickthrowman · 6m ago
If I retired at 40 I don’t think I’d want to remove more than 2% a year from the principal amount, which is.. $12,000-$16,000 a year.
How is that possible? Even with a fully paid off house, you still have property taxes, utilities, maintenance.
Even 4% a year which is recommended for a 30 year retirement, you’re only taking out $24,000-$36,000 a year.
usaar333 · 42m ago
Sure, if you are single with no family and wiling to live outside California.
KaiserPro · 2h ago
probably right, but I'm not in SV. So its enough to pay off the mortgage and provide enough monthly income to not care what job I'm doing
throwawayq3423 · 2h ago
Or in any big city tbh.
Scoundreller · 2h ago
Cleveland not big enough for you???
ohdeargodno · 1h ago
Take a million, go live literally anywhere that isn't Silicon Valley, remote work for a company that interests you, or your own project.
There's very few currencies in the world in which 1M isn't enough to retire. USD isn't one of them.
occz · 34m ago
>There's very few currencies in the world in which 1M isn't enough to retire. USD isn't one of them.
Unless you're planning on retiring as cheaply as humanly possible, 1M is not enough to retire for the large majority of the currencies in the world.
Smells like a strong bias against employees in favor of management and founders.
Lionga · 1h ago
That is YCombinator & Garry Tan for you. Disrupting the screwing over employees (and founders if they can but its just much harder) as a sport.
czbond · 1h ago
I believe Tan's words were mis-represented. I believe he is saying that it cost Prim $20M and he then wrote that post. I don't think he is insinuating anything else.
Invictus0 · 1h ago
He's misrepresenting his own words when he writes a vague tweet like that. Tan is a serial shitposter and is known for blocking thousands of people that even slightly disagree with him.
gsibble · 1h ago
That was really shady.
JumpCrisscross · 1h ago
Could you expand what's going on there?
chambers · 51m ago
My read was that Garry Tan implied "you sacrificed a lot of money in order to grandstand". I felt that was a knee-jerk dismissal of a founding employee's legitimate concern.
BhavdeepSethi · 2h ago
I went through an acquisition very early in my career, and for the longest time I believed it was the best outcome for everyone. Over time, I realized that my naive belief was purely due to the founders going way above and beyond to make sure each and every employee (including folks doing just data entry) got a good outcome (accelerated vesting, significant equity in new company, top of the band pay, etc.). It made me realize that if you ever want to work at a start up, bet on the founder, rather the company. Even with mediocre outcomes, you'll end up ahead in the long run compared to folks who're just looking out for themselves.
rhyperior · 1h ago
They must have had a strong position from which to negotiate those favorable terms, in addition to the experience to know to do so, and the integrity to actually do it. The type of people you should follow.
BhavdeepSethi · 54m ago
I don't believe they did. This acquisition was by Flipkart, the poster child startup in India, who had a very high bar for hiring. They wanted to interview the non-founders to make sure they met the standard. The founders said you get all or you get none. To be fair, it was a small team of 6-8 employees, so I doubt Flipkart cared. :)
jacquesm · 2m ago
Always, always think about the downside scenarios if you enter an agreement. If you don't you will end up regretting it for sure.
mawadev · 2h ago
I'm waking up personally to the unethical side of Software development as well. You can either do little and get paid pocket change or you can provide a ton of value for pocket change next to some promises lulling you in, where the value of your work exponentially increases, but you will see nothing of it and whatever you do: you are still a replaceable cell in excel to them and there will be ways where you get dragged over the table. If the money isn't directly in your bank account, it might as well not exist or was a lie.
Sooner or later you are the horse behind the barn anyway.
istjohn · 1h ago
To state the obvious, software developers are doing just fine.
Muromec · 53m ago
You do sometimes get the 0.31% of a relatively big number under a promise you tag along for two years and some more pocket change on top. Still better than just pocket change zo
GuinansEyebrows · 55m ago
how much change fits in your pockets?
CalChris · 1h ago
This was just a preference cliff, plain+simple. Windsurf got paid maybe $3B for itself. But the investors and senior management got their cut first. How? Well, the preferences they negotiated.
No one really knows how the game is played
The art of the trade
How the sausage gets made
We just assume that it happens
But no one else is in the room where it happens
#2 wasn't in the room when it happened. In a very real sense, he's lucky he got anything. Management owes a fiduciary duty to the shareholders and #2 is a shareholder. But negotiating the $3B covers that duty.
highfrequency · 1h ago
Doesn't seem that simple. They raised a total of ~$250m and acquisition price was almost 10x that. The preference cliff means that employees get nothing before investors get an X% return on their investment (100%, 150%, maybe 200%). After that, the payout should be proportional to common stock ownership. Surely the preference guarantee was not 10x?
Would be curious to see the breakdown of the $2.4b:
1. How much to the founders in Google employment incentives
2. How much in licensing fee to the company itself
3. How of the licensing fee went to immediate payout to VC investors (+ employees)
4. How much got left on the balance sheet of the remaining company
I don't understand how #3 can be so large and common stock holders walk away with almost nothing without breaching fiduciary duty?
CalChris · 18m ago
The August 2024 Series C round (last of 4 rounds) for $150M could dilute+smoke the preference stack for any earlier investors of which #2 nominally was basically the earliest class member of. C gets preferences+participation. B+A get preferences+participation+anti-dilution. Common gets what's left which apparently wasn't much.
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?
scns · 50m ago
> in the room where it happens
Great song from Hamilton. Sorry for being off topic.
lemax · 3h ago
This is a fair cautionary tale but it's worth understanding the specifics of the situation – Windsurf maintained a relatively easy to replicate product with no moat, and employed a bunch of attractive talent. The company got gutted of these employees and lost its valuation because no suitable buyer thought their IP was exceptionally valuable on its own. Just because this was the outcome for Windsurf does not mean there are no longer opportunities to join startups building sticky customer bases with valuable IP and walk away wealthier when they exit – yes there is a liquidity problem[1] but let'a be honest with ourselves about the specifics of the case for Windsurf.
Actually, their recent acquirer is now raising at a $10B valuation from Founder's Fund.
They had plenty of value left even after getting gutted.
cleandreams · 2h ago
My base salary was fine but the magic was in the stock.
I got a payout on acquisition by a FAANG+ (as first employee). It was only 300K but I put 50K of that into Nvidia. Actually I invested all my payout from my startup stock into tech stocks. And I got a terrific golden handcuffs deal.
After that I could afford to retire and I did.
another_twist · 2h ago
Did you also post this recently in Blind ? If it is so you might want to fuzz the numbers a bit.
cleandreams · 1h ago
Less than 10 years ago but not recent.
crazygringo · 1d ago
This is one of the most confusing things I've ever read.
Cognition acquired Windsurf. So how has he "joined Cognition"?
"I had a place at Google DeepMind as part of the deal." What does that mean? DeepMind doesn't have anything to do with Cognition or Windsurf, right?
Why would an offer at Google require forfeiting vested shares in Windsurf? Is that Windsurf policy or Cognition policy or Google policy?
"I was ultimately given a payout of only 1% of what my shares would have been worth at the time of the deal." So he took the payout and forfeited the shares? "In going to Cognition, I’ve chosen a different direction." Or not, he rejected the payout and kept the shares? I can't even tell what's hypothetical versus what actually happened.
I literally don't understand a single thing about this tweet. I've read all the comments here so far and my confusion seems to be shared. Can anyone who has context please help explain what's actually going on? And particularly how any company could force you to forfeit vested shares in a company?
shawabawa3 · 1d ago
You have to know some of the background
Google poached windsurf employees and licensed their tech, paying out billions to upper management but apparently offering a fraction of the value of shares
This employee chose to stick with windsurf instead of moving to Google
Windsurf was then acquired by cognition for an unspecified but probably quite low amount
So this employee is now at cognition
crazygringo · 1d ago
Thank you, that helps!
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.
cyanydeez · 22h ago
the board strokes is: Google should have bought the company. They didnt. They basically bought the employees. They call it a "acquihire". Without these employees, the real value of the company fell, allowing cognition to buy the company. Had the employee taken employement with Google, it's likely their shares in windsurf would have been voided, or otherwise not vested. Who knows, these private corporations are often doing a bunch of shady things to dilute share ownership.
In a private company, there's no "real" public valuation of a share, so an employee who has some kind of stake really only has two real options to dump their shares, either through a company buying it (cognition) or the company going public. Without either of these events, it's really difficult, even if there's no contract about it, to sell the shares.
So the value of the company took a nose dive in the private market through the hiring of windsurfs principals, and the employee either kept his shares and went with the company, or took a job with google. So the two values are:
1. Stay with Cognition and retain the private market shares of Windsurf and salary
2. Leave cognition, forfeit(?) the shares, get whatever salary google offered
So those are the payouts being compared.
mikestew · 3h ago
Google should have bought the company. They didnt. They basically bought the employees. They call it a "acquihire".
That's just called "hiring". In order to "acquire-hire" employees of the target company, one must first "acquire" the company and the "hiring" part just comes along with the deal. In this case, Google skipped the "acquire" part.
gsibble · 1h ago
The VCs all got paid their multiples.
Google put a ton of money into the company which then repurchased select people's stock while leaving everyone else high and dry.
dboreham · 3h ago
> They call it a "acquihire"
Surely it needs to be called something else, because acquihire means "hire some employees by means of acquiring the company they currently work for" (it's in the name). Since Google did not acquire the company, it can't be an acquihire event. "bribehire" or something?
crazygringo · 21h ago
Thank you very much! So it seems like the crux of the issue still isn't clear, because:
> Had the employee taken employement with Google, it's likely their shares in windsurf would have been voided, or otherwise not vested.
That doesn't make any sense. The shares are already vested, they legally own them. How could they have been voided?
The idea of joining Google resulting in a "1% payout" doesn't seem to make any sense? Why would there even be any payout at all? And is it mandatory? How could it be?
And then it also doesn't even seem obviously terrible. If the valuation of Windsurf tanked, then is keeping the shares (now presumably converted to Cognition shares at a rate determined by the purchase?) even a better financial outcome?
I agree that Google acquiring the talent rather than buying the company seems shady. But the "1% payout" still isn't making much sense here and needs a lot more details. Because it's still not even clear if the payout is from Google (huh?) or Cognition (why?), or how it could be a mandatory condition of employment at Google.
bigmadshoe · 1h ago
Vested options haven’t been exercised and are typically voided when leaving a company. Just because you vested the options doesn’t mean they are permanently yours, unless you choose to exercise them before leaving.
stouset · 19h ago
Vested is not exercised.
Options vest, but you have to exercise them to purchase the underlying shares. This is nominally cheap, but from the IRS’ perspective you have just spent $1 to purchase a share worth $100, so that’s $99 of income. Multiply by a large number of options and you can easily have a real multimillion dollar tax bill even though you have no way to sell the shares to recoup their value.
Worse, if the company loses its value before you can sell, you’re still out those taxes with zero recourse. It’s an enormous risk.
If you leave a company with vested but unexercised shares, you generally forfeit them.
ProfessorLayton · 2h ago
While you're right that exercising options can be very expensive and are a risky tax bet, we're talking about employee #2 in this case. They should've been able to buy in early at a low price and tax bill if they really believed in the company:
- Jan 2021: 3M seed round
- Jan 2024: Series B valuing the company at 500M
That's 3 years of vesting below a 1B company valuation, and 75% of a typical vesting schedule. There was plenty of opportunity to buy when valuations were low.
There's also 83(b) election that allows one to prepay tax liabilities on stock options before they vest.
Not buying stock options or doing a 83(b) election is also a bet that can place a cap on losses if the company goes downhill, but the risk flips if everything goes right.
toast0 · 1h ago
You want to say exercising options. Buying options is paying to have an option; you can easily buy options on publically traded stocks, for example. Exercising options is delivering money that covers the strike price to receive the shares... or delivering the shares to receive the strike price, if it was a sell/put option (which employment related options wouldn't be)
crazygringo · 18h ago
Sure, but I'm not really clear on what that has to do with the situation described?
And he calls them vested shares though, not vested options, though maybe he's incorrect.
And it's not like you forfeit them instantly after leaving anyways. You usually have at least 90 days. And the fact that the value of the company is so much lower now is favorable, if you think the value will recover.
But again, none of this has anything to do with the "1% payout" here that is still totally unexplained.
masterjack · 17h ago
It’s possible that in the Google deal you had to agree to sell back the shares (at a low value like par or original strike price) and the 1% refers to either those proceeds or the size of the Google employment package. If you didn’t agree then you would be left holding your shares of a company that is now gutted.
crazygringo · 8h ago
> It’s possible that in the Google deal you had to agree to sell back the shares
But how could Google require that?
> If you didn’t agree then you would be left holding your shares of a company that is now gutted.
Which is what is sounds like he wound up doing anyways? Which I don't even understand why.
adgjlsfhk1 · 2h ago
Google can just refuse to hire you if you don't
crazygringo · 1h ago
I've literally never heard of a company demanding you give up shares in another company as a precondition of being hired, for an engineering role.
At the executive level they may not want you holding shares in a direct competitor because it presents a conflict of interest. But even then you generally have a period to divest.
Can nobody explain what the actual demand was here? What did Google offer vs. what did they demand, and why? And why would Google be buying your shares...? None of this makes any sense the way it's been presented.
naveen99 · 10h ago
Doesn’t income happen when you sell the shares ? What is the cost basis of the shares you purchase if not the strike price of the option ?
toast0 · 59m ago
AMT income happens when the option is exercised (vests and paid for), the difference between the value and the strike price is income at that time. The AMT cost basis is the value at that time ... or you can think of it as the strike price plus the amount of income.
At the same time, if it's an ISO option, there is no assessment of ordinary tax until the stock is disposed. If there's a merger and the proper forms are followed, you can be issued stock from the acquirer that retains the basis (the strike price) of the original shares. If the forms are not followed, the acquisition is a taxable disposition.
There's a credit for the difference between AMT tax and ordinary tax on ISOs, but it can take many years for that to fully work out, and you have to have paid the AMT in the meantime.
Early exercise with 83(b) at time of grant (or while the value hasn't changed) or exercise-and-sell make the taxes make the taxes simplest, but tax simplicity isn't always the best strategy.
Its different for vesting. Othrrwise even more toxic greed and tax avoidance would occur.
bryanrasmussen · 3h ago
Writing for LinkedIn metrics means never having to make an understandable statement that someone could take exception to.
ww520 · 34m ago
That’s why founding engineers are such a raw deal. They take just as much risk as the founders but much less payout. Also on the hook to do most of the work.
doctorpangloss · 26m ago
It's complicated. The difference between a founder and founding engineer - I think you mean early employee - is pretty big. The fact that they are getting a "raw deal" in your POV should inform you that the equity grants are not related to risk.
This is coming from someone who programs for a living: contrary to what you are saying, the money guys take too little equity. The money guy being, the reason you are raising money at all, and not just dipping into your own savings.
mjiang41 · 23h ago
Some more context from Ali Partovi, founder of Neo accelerator:
A lot of bias against startups in the comments. These are missing (1) how terrible the working conditions in bigco have become in the meantime (2) truly good startups (they exist) that pay solid base salaries
toomuchtodo · 1h ago
The odds are clear as day. ~90% of startups fail, and the truly good ones are very rare. Do small pockets of good exist? Yes, absolutely. But most of the startup ecosystem is convincing employees to grind for peanuts until founders and investors (whether that's accelerators or institutional) hit liquidity (if ever). Of course, if you find the unicorn (good comp, target work life balance, meaningful work [to you]), hold on tight and don't mess it up.
Depends on a big co. You can skip all the drama try harding and work in a boring place too.
jschveibinz · 2h ago
I am surprised that the employment agreements between execs/founders and Windsurf didn't address this. A cautious investor--or even a cautious key employee joining the team--would have locked the founders and key employees down to prevent them from being hired away without some recourse. This is especially important when all of the value was in the employees. There should be lawsuits forthcoming...
toomuchtodo · 2h ago
Non competes are illegal in California, there is no legal way investors can lock founders and employees down. This is venture capital investment risk. The employees, who are most of the value (aside from potential IP and customer contracts), can walk at any time.
jschveibinz · 2h ago
I understand your clarification. You should be able to use vesting schedules, right of first refusal to counter, careful definition of IP and trade secrets with assignment to the company, right of repurchase of shares, etc.
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?
DanHulton · 2h ago
It doesn't have to be a lawsuit preventing them from leaving. Golden handcuffs usually work pretty well for such a situation.
toomuchtodo · 2h ago
Unless investors and management are unwilling or unable to counter a superior offer. “Pay them more” works when willing and able. Otherwise, bounce. Comp is king during a gold rush you’re unsure how long will last.
nevon · 1d ago
I must be misunderstanding what he is saying, but I can't figure out what. Once his shares have vested, they are his. What entity forced him to sell his shares for 1% of what they are worth and how could they possibly do that?
shawabawa3 · 1d ago
Google did a weird thing where they poached windsurf employees, licensed their tech and hired the CEO and upper management, leaving a shelled out company behind
Looks like employees were given an exploding offer to join Google and sacrifice windsurf shares at a low valuation, or stick with windsurf
If you stuck with windsurf you then joined cognition in a later acquisition
nocoiner · 23h ago
Wow. How did the Windsurf investors feel about that?
lokar · 3h ago
They got paid out as well. Meta pulled the same thing recently.
So, a new trend where big tech “buys out” a startup in a way that only early VCs, founders and top managers get any value.
sarchertech · 3h ago
Seems like that makes options completely useless. If they had actual shares they could at least sue because majority shareholders have a duty not to completely screw over the minority.
lokar · 2h ago
It has always been possible (and sometimes happens) for VCs and mgmt to screw the early employees.
The question is will it become more common now?
Also, people equate these to aquihire deals. But they are not really. Most aquihire deals are when the company is out of runway, or it seems growth has slowed/stopped and there are no good ways out. There is not mucH value left.
Here there is clearly billions in value, it’s just not being distributed in the normal way.
sarchertech · 2h ago
It feels like it will become more common if Google gets away with this with no real backlash.
I mean why would anyone honor employee options when buying out a company if you can just poach all the key employees and assets.
As you said there was so much money involved. I can’t think of a similar situation where employees were screwed out of billions like this.
henryfjordan · 40m ago
You can, and maybe should, exercise 1 option as soon as you get it to turn yourself into a shareholder.
nocoiner · 1h ago
Thanks for the response.
It’s breaking my brain a little bit that this isn’t a straightforward breach of fiduciary duties to the corporation and its common stockholders. If an acquirer can deal with top management and holders of preferred shares, and scoop out the crown jewels of the corporation, then what’s even the point of using a Delaware corporation to raise capital? Might as well just form a Nevada LLC using an LLC agreement that just says “good luck.”
sundbry · 1h ago
Sounds like a breach of fiduciary duty to the common shareholders.
churchill · 1h ago
>Meta pulled the same thing recently.
Do you mean the Scale AI acquihire? I took it at face value that Alex Wang just joined Meta, but come to think of it now, the company's just a husk of itself, customers no longer trust them, etc. So, it seems you're referring to Scale.
lokar · 55m ago
Yeah, that must be the one. What did other employees get?
IncreasePosts · 2h ago
Why would they give the CEO a bunch of money to join Google, but not employee #2? Is it possible the CEO is just worth way more for what ever reason?
wmf · 1h ago
It's not entirely clear, but I think Google/DeepMind offered him 1% of (what he thought) the shares were worth and then he refused and then the shares became worth almost nothing because Windsurf was just a husk of its former self.
bigmadshoe · 1h ago
Vested options can be voided when you leave a company, unless you want to exercise them.
conartist6 · 1d ago
Cognition made him a lightning offer it sounds like, valid one day only.
I think if I understand what he is saying he could either stick with the product and team giving up the shares, or keep the shares and try his luck getting money for them another way.
I appreciate that his choice shows that he is in it for the product and the team, but also ouch.
No comments yet
fragmede · 1d ago
Whichever entity ended up buying Windsurf, the corporation. They get to declare the exchange rate, and for what. Sometimes it's cash, sometimes it's stock, usually it's some mix of both.
nocoiner · 1d ago
Where would the 99% haircut have come into play?
wqaatwt · 16h ago
Nobody willing to pay as much as OpenAI was offering initially? Of course that valuation was about as absurd as it gets…
bachmeier · 1d ago
Not much of a story here. The guy got a better offer and he took it:
> I was given an offer that would explode same day. I had to forfeit all of my vested shares earned over my 3.5+ years at Windsurf.
mitthrowaway2 · 1d ago
It's still pretty shocking to have to forfeit shares that have vested.
nocoiner · 1d ago
It’s like, what does vesting even mean?
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…
SAI_Peregrinus · 3h ago
Vest has two meanings: If it's a stock option, then it means you have the ability to purchase a share at a pre-determined price, no matter the current public price of the stock (or even if there is no public price). If it's a Restricted Stock Unit, it means you own that share.
charcircuit · 2h ago
The author refers to them as "my shares" which implies he has possession of the shares.
skybrian · 2h ago
When people give you a percentage (1%), that is a ratio and they are not telling you either number. So, that makes me a little suspicious. I wonder how much he got in the end?
sampton · 1h ago
Bro got a cool mm package but wanted 100mm.
linotype · 1d ago
I’m afraid behavior like this will only get more common and really shines a light on what a bad deal startups are for anyone but VCs and founders. Windsurf founders should be ashamed of themselves, but of course won’t be.
sublinear · 1d ago
Buy the ticket, take the ride.
jen20 · 1d ago
But also understand who broke the ride in mid-air, and treat them with according levels of scorn in future.
TrackerFF · 1d ago
Financially speaking, is it even worth joining a startup anymore? Compared to just going to any of the big companies. The latter will likely pay you more, with less risk involved.
Seems like the best shot is to strive toward becoming financially independent, and then just go for the startup route and follow your passion. If you it doesn't work out, no big deal - if things turn out great, you'll just be even better off.
rexreed · 2h ago
I am of the firm belief the solopreneurship is the future, especially with the power of AI. I don't believe corporations of any type, from startup to tech giant have the interests of anyone but the majority shareholders in mind. Employees, customers, partners, all get the shaft. When money is involved, startups aren't product companies, they're financial instruments.
marssaxman · 1d ago
Was there ever a time when you could reasonably expect to make more money by joining a startup? That has never been the case so far as I am aware, and I'm currently on my seventh tour through startup-land...
phendrenad2 · 19h ago
It was always a bad deal. It was supported by urban legends of janitors and cafeteria workers getting seven-figure payouts because they negotiated a few shares of a company that went IPO and went "unicorn". But the reality was, most startup companies failed, and most shares became worthless. In 1995, 2005, 2015, etc. it was the same story.
The only thing that changed recently is the "unicorns" stopped happening altogether.
givemeethekeys · 23h ago
It feels like it is worse now than it used to be. Back in 2010, you would be giving up a nice salary but not a much nicer salary by working at a startup.
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.
antonymoose · 23h ago
I did a startup circa 2010, early number employee, given our (failed) attempt and my equity I would have conservatively walked away with a $500k sum had the Founders’ plans worked. That would have bought me a fine house in the nicest part of town with cash to spare.
Having done two more, the best outcome I’ve seen is a 50k post tax payoff for 5 years of shitty startup conditions. Great, I got a down payment on a house now worth 800k.
So that reason the best play, if you’re not a founder doings cash out early, is to just play it safe in a big job and dock money away in equities and real estate.
klooney · 18h ago
Base salaries aren't terrible at startups, it's the RSUs and ESPP they can't match. I can deal with a terrible IT department preventing progress for double the money, it's fine.
marssaxman · 17h ago
I really cannot, so - good for you! It takes all kinds.
There is nothing I could do for pleasure, even with double my salary, which would compensate for the misery I would feel working a job I hated. But that's who I am, and we're not all the same!
khuey · 3h ago
More? Not really. But before Zuckerberg and the DOJ blew up the illegal wage fixing the big valley companies engaged in the gap was smaller.
eweise · 3h ago
Maybe way back in the .com days but its a terrible decision financially now.
absoluteunit1 · 1d ago
> Seems like the best shot is to strive toward becoming financially independent, and then just go for the startup route and follow your passion.
This is what I’m trying to do now. Having worked in startups and big tech; I think the best thing one can do is to attempt to forge their own path. For independence, financial gain and sanity
BrawnyBadger53 · 1d ago
It's generally not a good sign to me that this is the case. But I think you're right. Something needs to change to make startups feel more viable again.
pjmlp · 17h ago
Outside US hardly, unless being one of the founders, because stuff like being given shares is not common.
You will get a regular salary, with occasional performance bonus, just like any regular company, with all the action a startup requires.
lovich · 1d ago
Has it been worth it in a while? This is a legitimate question as I am on the east coast and wonder if it differs from the west coast environment.
At least in my anecdotal experience, everytime I’ve entertained a startups offer in the past decade it’s been either something like engineer #1, 3% equity and no you cannot see the cap table or other agreements with investors, or something like 10k units at 25 a share when we’re on series z, and you lose them if you leave, and you can’t sell for 6 months if you leave, and the investors have priority on payment if we sell for less than our valuation and yadda yadda yadda.
I mentally just valued the equity as 0 in the compensation with all those limitations on liquidating them and never understood why anyone joined a startup
xkcd-sucks · 23h ago
Oh also there is the trick where the startup gets sold a little under its strike price and the execs each get signing bonuses > book value of company as sold
saagarjha · 2h ago
What I find amusing is that YC’s Garry Tan is going around explaining to Prem how he actually got a good deal and that the Windsurf founders were very generous to their early employees. Meanwhile from his perspective he joins a company with friends he’s known for years, takes on basically the same risk that the founders did, probably gets some fraction of the equity they did for that work (10%? Less?) and then when payoff time comes he gets cheated out of that too.
If I was a venture capitalist dependent on 20-somethings believing in the dream I sold them maybe I wouldn’t write snarky replies on them on Twitter when this happens and actually look into fixing things for early employees (like, maybe, giving them similar terms that the founders get), but that’s just me I guess.
dragonwriter · 2h ago
He has just as much financial interest in the dream being false as he does in people believing it, which your recommendation seems to overlook.
why would anyone work in startups as early devs anymore. Tell me what is the upside? There seems to be only downsides.
Startup Fails , you loose - Gets acquired - you loose
What is the motivation to perform .
mianos · 1d ago
If you want to write new code and have a lot of influence over the overall implementation instead of fixing bugs on a years old steaming pile of tech debt.
Not all places with large existing codebases are that bad, but if you are experienced, it can be very personally satisfying doing something well before it has degraded over time.
I have worked in quite a few. One is a household name down here in Australia. I was the first engineer with the two founders. I worked 2 years 24/7 for half the salary I got when I left. I'll never get my money back but that's ok as I loved the time there.
agartner · 1d ago
Working on decently cool things with relatively limited bureaucracy.
phkahler · 1h ago
You can do that at established companies. If the cool thing comes to an end you'll often have a boring job you can keep or stay at while you find something else.
SirMaster · 3h ago
Because you like the work you are doing and the projects you are working on?
Presumably you have a lot more control and freedom to do things how you want than at a large company with a lot of red tape etc.
That's the main reason I would do it.
lsllc · 2h ago
So "heads I win, tails you lose!"
BoiledCabbage · 22h ago
> There seems to be only downsides. Startup Fails , you loose - Gets acquired - you loose What is the motivation to perform
You get to make a nice payout for a VC.
And isn't that all of our life goals?
brutuscat · 1d ago
He should come to the UE to work on … oh wait!
SirMaster · 3h ago
Why do people care so much about what some random guy did in a company acquisition?
lokar · 3h ago
A lot of this industry is focused on early stage startups as a path to financial success. The rules and laws around this don’t tend to protect even early employees much at all. People depend on social norms for what to expect. Shifts in the norms are of interest.
blitzar · 1h ago
Everyone thinks they are the next random person who wins the startup lottery. Dreams of 50 million dollar paydays are brought crashing down when they realise they will be lucky to get 50,000.
Muromec · 44m ago
Because it sets the expectations and everyone here is (pretending) to play the same game as that random guy. Okay, not everyone, but it's YC forum.
Don't just accept promises. Ask for the 409A valuation, liquidation preferences, and pay bands. If a company won’t provide transparency, that’s your signal.
Equity is a lottery ticket. Salary is money in the bank.
It's always worth offering to take equity as long as they agree in writing to not ever dilute your shares and vest them immediately. However, it's unlikely that any company will agree.
It's best to imagine compensation as exactly one's salary. Then (virtually) all surprises are good.
Ask HN: How to negotiate stock options? - https://news.ycombinator.com/item?id=28401655 - September 2021
You can almost never get any info on equity until it's too late and you realize it's worth nothing.
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.
There's many opportunities for VCs and founders to screw you over. And that's assuming things go well enough for that to be an option lol
Yeah, because that is in your interests, not the engineer's.
I always take more equity. I wouldn't work for you in the first place if I didn't believe in your equity.
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
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.
That's exactly why it is true. If every person who held early stage stock walked out of those events happy then no one would recommend they focus on salary.
The only time it ever makes sense to push for more salary instead is if you literally cannot get a job at a public company (or even a near IPO unicorn). Plenty of startup employees can, so clearly they believe their startup equity is worth something.
Financially speaking, startup equity is actually worth a lot as an employee (https://www.amafinance.org/startup_comp/). Yah, over 50% it's going nowhere but expectation needs to consider how huge the win is even if it is lower probability.
yes that's literally the definition of expectation value...... so
hence you should absolutely not be taking higher equity/lower salary ever. hell i wouldn't even take that at a publically traded company if given the option.But you don't want to be that employee...
Even if the OP considers the full headline number of $2.4b to be the value of the company, and taking his "1% of fair" number as truth, seven figure payouts would imply all 40 founding engineers had >4% equity which is nonsensical.
For his assertion to be right, 40 people need to get paid out at least 1 million. That's 1.67% of the company or 0.04% evenly. Its not hard for me to image that up to 10% of this cap table was distributed among the 40 people.
Nevermind that $1m over ~4 years is approximately the same as the differential other public tech co's pay. ($150k + equity at YC co, $350k TC at G/Amzn/FB/Uber/etc.) So when they tell everyone they should work at YC co's, they're saying they're proud when in the absolute best case scenario you make just as much as at the public co's they rail against working for.
If you want to come across as genuine, directly say how much % of the payout went to employees that weren't the founders. They won't, because it's likely 3%, which correctly sounds horrible
Who did you hear it from Garry, the founder that made out with all the money ? Or the other VC that made a few hundred million from the sale and stands to gain even more if the lie of "founding engineers get rewarded" is perpetuated?
The headline "startup bought for x million" is almost always a lie, either direct or by omission.
First, when a startup is bought, its generally not bought at the headline rate. So if you see a "bought for $45m" that doesn't mean People who own shares all got a % of 45m.
That number is normally bullshit, but also a "total package" which include share offers for joining the new company.
This means you will get say 1% of the headline buyout now, and then golden handcuffs to get the rest.
Also, it makes no sense to give employees that much money upfront. After all, if I'd been given $1m in one go, I wouldn't be fucking working now.
When we were talking to various companies about acquiring Sandstorm.io (my startup) in 2017, one of the companies told me, essentially: "We aren't interested in your IP, only the employees. We'll give you a set of job offers for them. We will then sum up the salary and equity grants from these offers, and call that the acquisition price. If you want to take some of that money and redirect it to your investors instead, that is up to you."
I was a bit taken aback. Obviously I wasn't about to take a cut of my employees' future comp and give it to investors.
Instead we ended up going to Cloudflare, but not as an acquisition. Cloudflare told us very honestly that they couldn't justify buying the IP, but they would be willing to acquire the company for $0 to wind it down for us. I decided to just take the job offers but keep the company independent as an open source side project, thinking maybe I'd revive it eventually. Turned out to be a mistake as some guy who was mad we didn't hire him sued Sandstorm six months later, and that was then my problem instead of Cloudflare's, oops. Should have sold for $0.
(Once it became clear to the plaintiff('s lawyer) that we weren't going to settle, they stopped pushing the case forward, but didn't drop it, so it just sat in limbo for 5 years before the judge finally threw it out it 2022. Meanwhile I couldn't dissolve the company and had to keep filing taxes for it. Ugh... lessons learned.)
Unless you already had several other million saved already, I bet you’d be working again.
How is that possible? Even with a fully paid off house, you still have property taxes, utilities, maintenance.
Even 4% a year which is recommended for a 30 year retirement, you’re only taking out $24,000-$36,000 a year.
There's very few currencies in the world in which 1M isn't enough to retire. USD isn't one of them.
Unless you're planning on retiring as cheaply as humanly possible, 1M is not enough to retire for the large majority of the currencies in the world.
Smells like a strong bias against employees in favor of management and founders.
Would be curious to see the breakdown of the $2.4b:
1. How much to the founders in Google employment incentives
2. How much in licensing fee to the company itself
3. How of the licensing fee went to immediate payout to VC investors (+ employees)
4. How much got left on the balance sheet of the remaining company
I don't understand how #3 can be so large and common stock holders walk away with almost nothing without breaching fiduciary duty?
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?
Great song from Hamilton. Sorry for being off topic.
[1] https://techcrunch.com/2024/01/11/us-startups-have-a-liquidi...
They had plenty of value left even after getting gutted.
I got a payout on acquisition by a FAANG+ (as first employee). It was only 300K but I put 50K of that into Nvidia. Actually I invested all my payout from my startup stock into tech stocks. And I got a terrific golden handcuffs deal.
After that I could afford to retire and I did.
Cognition acquired Windsurf. So how has he "joined Cognition"?
"I had a place at Google DeepMind as part of the deal." What does that mean? DeepMind doesn't have anything to do with Cognition or Windsurf, right?
Why would an offer at Google require forfeiting vested shares in Windsurf? Is that Windsurf policy or Cognition policy or Google policy?
"I was ultimately given a payout of only 1% of what my shares would have been worth at the time of the deal." So he took the payout and forfeited the shares? "In going to Cognition, I’ve chosen a different direction." Or not, he rejected the payout and kept the shares? I can't even tell what's hypothetical versus what actually happened.
I literally don't understand a single thing about this tweet. I've read all the comments here so far and my confusion seems to be shared. Can anyone who has context please help explain what's actually going on? And particularly how any company could force you to forfeit vested shares in a company?
Google poached windsurf employees and licensed their tech, paying out billions to upper management but apparently offering a fraction of the value of shares
This employee chose to stick with windsurf instead of moving to Google
Windsurf was then acquired by cognition for an unspecified but probably quite low amount
So this employee is now at cognition
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.
In a private company, there's no "real" public valuation of a share, so an employee who has some kind of stake really only has two real options to dump their shares, either through a company buying it (cognition) or the company going public. Without either of these events, it's really difficult, even if there's no contract about it, to sell the shares.
So the value of the company took a nose dive in the private market through the hiring of windsurfs principals, and the employee either kept his shares and went with the company, or took a job with google. So the two values are:
1. Stay with Cognition and retain the private market shares of Windsurf and salary
2. Leave cognition, forfeit(?) the shares, get whatever salary google offered
So those are the payouts being compared.
That's just called "hiring". In order to "acquire-hire" employees of the target company, one must first "acquire" the company and the "hiring" part just comes along with the deal. In this case, Google skipped the "acquire" part.
Google put a ton of money into the company which then repurchased select people's stock while leaving everyone else high and dry.
Surely it needs to be called something else, because acquihire means "hire some employees by means of acquiring the company they currently work for" (it's in the name). Since Google did not acquire the company, it can't be an acquihire event. "bribehire" or something?
> Had the employee taken employement with Google, it's likely their shares in windsurf would have been voided, or otherwise not vested.
That doesn't make any sense. The shares are already vested, they legally own them. How could they have been voided?
The idea of joining Google resulting in a "1% payout" doesn't seem to make any sense? Why would there even be any payout at all? And is it mandatory? How could it be?
And then it also doesn't even seem obviously terrible. If the valuation of Windsurf tanked, then is keeping the shares (now presumably converted to Cognition shares at a rate determined by the purchase?) even a better financial outcome?
I agree that Google acquiring the talent rather than buying the company seems shady. But the "1% payout" still isn't making much sense here and needs a lot more details. Because it's still not even clear if the payout is from Google (huh?) or Cognition (why?), or how it could be a mandatory condition of employment at Google.
Options vest, but you have to exercise them to purchase the underlying shares. This is nominally cheap, but from the IRS’ perspective you have just spent $1 to purchase a share worth $100, so that’s $99 of income. Multiply by a large number of options and you can easily have a real multimillion dollar tax bill even though you have no way to sell the shares to recoup their value.
Worse, if the company loses its value before you can sell, you’re still out those taxes with zero recourse. It’s an enormous risk.
If you leave a company with vested but unexercised shares, you generally forfeit them.
- Jan 2021: 3M seed round
- Jan 2024: Series B valuing the company at 500M
That's 3 years of vesting below a 1B company valuation, and 75% of a typical vesting schedule. There was plenty of opportunity to buy when valuations were low.
There's also 83(b) election that allows one to prepay tax liabilities on stock options before they vest.
Not buying stock options or doing a 83(b) election is also a bet that can place a cap on losses if the company goes downhill, but the risk flips if everything goes right.
And he calls them vested shares though, not vested options, though maybe he's incorrect.
And it's not like you forfeit them instantly after leaving anyways. You usually have at least 90 days. And the fact that the value of the company is so much lower now is favorable, if you think the value will recover.
But again, none of this has anything to do with the "1% payout" here that is still totally unexplained.
But how could Google require that?
> If you didn’t agree then you would be left holding your shares of a company that is now gutted.
Which is what is sounds like he wound up doing anyways? Which I don't even understand why.
At the executive level they may not want you holding shares in a direct competitor because it presents a conflict of interest. But even then you generally have a period to divest.
Can nobody explain what the actual demand was here? What did Google offer vs. what did they demand, and why? And why would Google be buying your shares...? None of this makes any sense the way it's been presented.
At the same time, if it's an ISO option, there is no assessment of ordinary tax until the stock is disposed. If there's a merger and the proper forms are followed, you can be issued stock from the acquirer that retains the basis (the strike price) of the original shares. If the forms are not followed, the acquisition is a taxable disposition.
There's a credit for the difference between AMT tax and ordinary tax on ISOs, but it can take many years for that to fully work out, and you have to have paid the AMT in the meantime.
Early exercise with 83(b) at time of grant (or while the value hasn't changed) or exercise-and-sell make the taxes make the taxes simplest, but tax simplicity isn't always the best strategy.
Its different for vesting. Othrrwise even more toxic greed and tax avoidance would occur.
This is coming from someone who programs for a living: contrary to what you are saying, the money guys take too little equity. The money guy being, the reason you are raising money at all, and not just dipping into your own savings.
https://x.com/apartovi/status/1948444826674102732
bad look all around.
https://www.marketsentiment.co/p/the-yc-report
https://news.ycombinator.com/item?id=42828198
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?
Looks like employees were given an exploding offer to join Google and sacrifice windsurf shares at a low valuation, or stick with windsurf
If you stuck with windsurf you then joined cognition in a later acquisition
So, a new trend where big tech “buys out” a startup in a way that only early VCs, founders and top managers get any value.
The question is will it become more common now?
Also, people equate these to aquihire deals. But they are not really. Most aquihire deals are when the company is out of runway, or it seems growth has slowed/stopped and there are no good ways out. There is not mucH value left.
Here there is clearly billions in value, it’s just not being distributed in the normal way.
I mean why would anyone honor employee options when buying out a company if you can just poach all the key employees and assets.
As you said there was so much money involved. I can’t think of a similar situation where employees were screwed out of billions like this.
It’s breaking my brain a little bit that this isn’t a straightforward breach of fiduciary duties to the corporation and its common stockholders. If an acquirer can deal with top management and holders of preferred shares, and scoop out the crown jewels of the corporation, then what’s even the point of using a Delaware corporation to raise capital? Might as well just form a Nevada LLC using an LLC agreement that just says “good luck.”
Do you mean the Scale AI acquihire? I took it at face value that Alex Wang just joined Meta, but come to think of it now, the company's just a husk of itself, customers no longer trust them, etc. So, it seems you're referring to Scale.
I think if I understand what he is saying he could either stick with the product and team giving up the shares, or keep the shares and try his luck getting money for them another way.
I appreciate that his choice shows that he is in it for the product and the team, but also ouch.
No comments yet
> I was given an offer that would explode same day. I had to forfeit all of my vested shares earned over my 3.5+ years at Windsurf.
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…
Seems like the best shot is to strive toward becoming financially independent, and then just go for the startup route and follow your passion. If you it doesn't work out, no big deal - if things turn out great, you'll just be even better off.
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.
Having done two more, the best outcome I’ve seen is a 50k post tax payoff for 5 years of shitty startup conditions. Great, I got a down payment on a house now worth 800k.
So that reason the best play, if you’re not a founder doings cash out early, is to just play it safe in a big job and dock money away in equities and real estate.
There is nothing I could do for pleasure, even with double my salary, which would compensate for the misery I would feel working a job I hated. But that's who I am, and we're not all the same!
This is what I’m trying to do now. Having worked in startups and big tech; I think the best thing one can do is to attempt to forge their own path. For independence, financial gain and sanity
You will get a regular salary, with occasional performance bonus, just like any regular company, with all the action a startup requires.
At least in my anecdotal experience, everytime I’ve entertained a startups offer in the past decade it’s been either something like engineer #1, 3% equity and no you cannot see the cap table or other agreements with investors, or something like 10k units at 25 a share when we’re on series z, and you lose them if you leave, and you can’t sell for 6 months if you leave, and the investors have priority on payment if we sell for less than our valuation and yadda yadda yadda.
I mentally just valued the equity as 0 in the compensation with all those limitations on liquidating them and never understood why anyone joined a startup
If I was a venture capitalist dependent on 20-somethings believing in the dream I sold them maybe I wouldn’t write snarky replies on them on Twitter when this happens and actually look into fixing things for early employees (like, maybe, giving them similar terms that the founders get), but that’s just me I guess.
Not all places with large existing codebases are that bad, but if you are experienced, it can be very personally satisfying doing something well before it has degraded over time.
I have worked in quite a few. One is a household name down here in Australia. I was the first engineer with the two founders. I worked 2 years 24/7 for half the salary I got when I left. I'll never get my money back but that's ok as I loved the time there.
Presumably you have a lot more control and freedom to do things how you want than at a large company with a lot of red tape etc.
That's the main reason I would do it.
You get to make a nice payout for a VC. And isn't that all of our life goals?