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Comment by cyberferret | Hacker News Reader

Amazing story. Well done Carl. I don't think I would have had the strength of character to turn down an acquisition offer from Microsoft like he did.

Good to see a company with turnover in the $80M/yr range and still being 100% owned by him and his wife.

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That to me would be a red flag unless the pay and other comp was phenomenal. Not talking about a facebook IPO or taking VC money, but thought train would be forget about any equity/options the company has been going for 15yrs, $1b turnover and thousands of staff and the owners haven't diluted any of their shares to even reward the longest most loyal executives.

If he decided from the start that he wasn't going to take investors or go public, handing out stock would be incredibly misleading since there isn't any market to trade in or liquidity coming. In that case simply paying well and creating a good workplace, free of investor pressures, is exactly the right thing to do (I can't say if that is the case here).

Well the company is in Canada and he brings in foreigners (Ukrainians) so he may not have needed to offer equity to get qualified people.

If he has no intention of selling or going public why would it matter? Even if he was giving out equity it would have no value since there aren't going to be any liquidation events.

To me it would be more of a red flag if he was giving away equity because he would be giving something that he knows will never have any value.

Some private companies distribute equity to employees; it pays dividends and sometimes gives voting rights. Taken to an extreme, this can result in the company becoming a cooperative.

Equity determines distributions, it's not like it's worth nothing until a liquidation event.

This may be different in Canada, but in the US if a company is owned 100% it makes more sense to have it taxed as an S Corp. In that case all "distributions" are salary that is taxed as ordinary income.

This is done because even though the income tax rate is high, it is lower than getting double taxed (paying corporate tax rates plus playing capital gains).

So generally if a company is owned 100% by one person there are no distributions. This means for a company like this equity has virtually no value and profit sharing is a far better deal for everyone involved.

it sounds like this company actually has ongoing profits, which means the shares do have value even without a liquidation event. Even closely-held small firms with little turnover can be valued (e.g., partnership buy-outs, unexpected death of a key shareholder, divorce).

> partnership buy-outs, unexpected death of a key shareholder, divorce

Since this company is 100% owned by Rodrigues, all of those events would require Rodrigues to decide to sell, or for him to die and for his heir(s) to decide to sell - all things that I would classify as liquidation events.

Maybe I am miscategorizing his viewpoints, but the article implied that Rodrigues doesn't plan on selling Soti.

So unless you are expecting Rodrigues to die soon I'm not sure what path exists for any other theoretical equity holders to gain any value from their equity.

A minority shareholder can force a liquidity event. For example, the founder gives 5% to a valued employee who after vesting and several years of company growth gets a divorce. Husband wants his 50% community property interest in those shares and the employee minority shareholder doesn't have enough cash. Court forces a sale.

Alternatively, employee pledges the shares as security for a loan and then defaults. Lender forecloses.

My point is this: there are ways for a minority shareholder to force a liquidity over the objections of the majority shareholders. Therefore those shares have value.

To be clear, $1B valuation of the firm, $80M revenue.

After reading the story, I'd put the valuation at $10B, at least.

They have 80 million in revenue and 700 employees. That's a fairly large number of employees for that amount of revenue. How on earth can they be worth 10 billion?

I was being facetious.

Sorry, it's difficult to tell in today's era of sky-high valuations!

They only have $80M in revenue but they're valued at $1B?

> They only have $80M in revenue but they're valued at $1B?

10x ARR + a bit for brand and goodwill. Its a stretch but the valuation seems about right.

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