What's the fix for the victims here?
I'm not sure why, in most comments not just this one, the idea that you need to be cynical and not trust someone's stated good intentions isn't included.
The idea of a world where I must be cynical about everything and trust nothing, is dystopian. And quite simply, would fail incredibly quickly.
But presumably, the employees are told that they won't get equity, and their cash compensation is high enough to make up for it.
If you tell me not to worry my little noggin about it because we're never selling :) and then you turn around sell for $12B, I'm going to feel a little shafted...
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But looks like they accounted for this with the 500m pool, so in this case they ended up "fixing" the problem.
I think in the end this will just be a cautionary tale on the other side of the "equity is worth TP" stories. I've always felt equity is a lottery ticket, but a lottery ticket isn't completely worthless...
ps: It is a little funny watching all the people rush to defend this, like Mailchimp's founders obviously saw the issue here and negotiated that pool into the deal, but random HNs are so quick to defend it with "that's business folks!" like human emotion is something to throw in the garbage when talking about $$$.
Mailchimp wouldn't have worked out with that mentality, it shows reading their story.
The thing I don't understand - why would someone 'never selling' influence someone else to work for less than market rate?
OK maybe I can think of some reason for a company producing something that saves peoples lives that you're afraid a big company wants to buy to shut down and push their inferior product but this ain't that scenario - so why?!?
sour-grapes. They see the equity payout, and imagined that they'd get a piece of it had they been compensated with equity.
What they don't see is the loss if the company went bust - like most startups do - because hindsight is 20/20
so realistically, it makes little difference if a company paid in equity or cash - as long as you calculate the discount for the equity compensation appropriately.
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Imagine a lottery/raffle/etc. where the state says "we're probably not going to be drawing the results for this, so instead of giving you a ticket with an expected value of $0.05 we'll give you a guaranteed $10 right now"
Mathematically that's a very generous offer!
But then the state turns around and runs the lottery after everyone takes them up on that offer with the understanding the ticket would be worth $0 if there's no draw.
The state paid you more than the expected value of your ticket, by the math you got compensated more than a fair amount and the odds are you would have made a lot less than $10... but do you think most people will be upset?
More upset than if they had just lost a normal drawing?
Do you not see how someone can feel mislead if told X will not happen and X thing happens?
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The rebuttal everyone in this thread is parroting is a tautology. Saying "things change". Yes by the very act of existing over a period of time a company will indeed have changed even if it's just age.
It's not a helpful response to how people feel, and again, you're always free to throw feelings in the trash in business... but at the very least have the courage to admit you're doing it. There's no reason to pretend you don't see why people don't like it
(And again Mailchimp's founders seemed to have that courage, hence the fund)
I assume GP's fix is, "Don't accept below-market pay."
which implies to me that people were accepting below market pay because - reasons?
on edit:
>Do you not see how someone can feel mislead if told X will not happen and X thing happens?
sure, but in the case of someone having accepted below market pay I can see how being misled would have meant an actual hurt suffered.
Let's say I like to bake cakes and the school announces this year because of Corona there will not be a bake sale but then 4 days before they announce guess what there will be anyway! Then I would be upset because I had changed my behavior based on what they said and now I couldn't undo it. I guess anyone who stayed at the company because it wouldn't be sold would feel mislead but why I guess I have a hard time considering to stay at a company because it wouldn't be sold as a decision I would make - I would want other reasons to stay at a company that would not matter whether it was sold or not.
It's obviously a failure of imagination on my part, so it would be good to have an actual scenario as to how someone would feel hurt not just if someone says X and its not X you are mislead, because you still need the part about how X made you do Y instead of Z.
You didn't get cheated, but you feel cheated.
And for the umpteenth time, you're always say to say "fuck your feelings, you knew the deal", but that works both ways, you know the deal on why people are going to feel cheated...
If Mailchimp's founders had never mentioned not selling (or were just ruthless) I'm sure that 500m fund would look a lot different...
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Also you wanted an example, here's one: https://news.ycombinator.com/item?id=28561963
no, this more like me thinking huh I guess there might be a problem here but I have a hard time conceiving of how there actually would be one.
Also I guess I would like an example in the actual scenario - people owning company saying they never sell but then they do many years down the road, people have changed their behavior on this promise how? Are you saying that there were people who would have said no I don't want to work at market rate for you if you're going to sell in the future, I will only work for you for equity if you intend to sell. That's what that example implies to me? Maybe my imagination is failing again here but that sounds crazy, although I have to admit playing the lottery sounds crazy to me anyway so...
And to be clear, I'm not saying that to be mean, but for example, if you get hung up because a lottery is used as an analogy for startup equity (which might as well be a lottery), then it really might be a little past you.
They're leaky abstractions.
Here the part that doesn't map perfectly is it's not either/or, it's a sliding scale.
People at other startups make a market rate and get a little equity, some get below market rate and a lot of equity. Even at the same company people can negotiate their position on that scale, trading one for the other.
But you were told essentially "the equity will never have value so don't worry about that scale".
But it turns out the equity could have value.
The analogy works to convey why people are feeling a certain way, it's not a 1:1 mapping to how startup equity is. That disconnect is what the words "might as well be" convey: https://english.stackexchange.com/a/171622
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Additionally unlike a true lottery there is some form of control and information on outcomes, it might feel random because companies can and do fail for unforeseen reasons, but it's not like someone is throwing darts at a board to choose which tech startup closes its doors today...
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Really I don't understand your deep lack of understanding if you're in this industry, have you never been given large amounts of equity before?
I personally chose a company that gave me solid cash compensation, but not as much as a competing offer, because they offered a lot of equity. I believed in their fundamentals and their position in the market.
Unsurprisingly the company continued to execute well and the equity ended up being worth more than quadruple my cash compensation.
I understand not relying on equity returns to plan out your financial future, but I really don't get a blanket mentality of only taking money upfront and not diversifying.
Do you not invest in the stock market either? Because that's also pretty similar to this situation... if your holdings crater to near nothing the fact you have liquidity from being on the public market doesn't really help...
If I'm told the company will never sell, and they're doing well, I'll feel that I have job security and a team that I will enjoy being part of for a long time. I've got stability.
I'm willing to trade some money for stability. The opposite of stability is "risk".
However, I'm a realist and realize that everyone has a price. MC's price was $12b, which is an incredible amount of money.
The loss of that stability would certainly shake me, though, even knowing that it was possible. And in that case, I'd probably be griping, too, hoping to get something for my pain. But again, I'm a realist, so I know it's unlikely I'd get anything.
the sale is fairly orthogonal to how secure your job is. The team could change, leadership changes, etc, can cause your security to fail. It's merely a feeling of security.
So you're essentially buying (with a reduced salary) the feeling, but not the reality, of security. I would not make that trade, if i were in the same position.
Now, if it ended here, I'd fully understand feeling stiffed and lied to. But mailchimp has about ~800 employees. a 500m pool is more than half a million per employee. That's a hell of a payout, considering the previously accepted stability and derisking.