Ask HN: What HN threads most influenced your thinking about startups? | Hacker News Reader

Ask HN: What HN threads most influenced your thinking about startups?

109 pointsbenvolio49 comments

I often find that reading the comments on a HN post lead to more insights than simply reading the linked website alone or just the OP, so in the spirit of HN as a link aggregator: What HN threads have most contributed to the way you think about startups now?

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Not one in particular, but I look closely at comments from disgruntled employees or what people hate in a workplace and then I make a mental note not to do that.

Coupled with common sense and basic human decency, it still has been an education.

HN also allowed me to be informed early on about COVID-19 and take the necessary measures. I cancelled my flight to Paris in February 2020 after being there in January and computing the risk borders would shut down. They shut down for more than a year and a half, and I have spent that time with my dying mother until the last moment. I would have missed the last year with her if I had taken that trip, and an important factor I did not take it was all the good people here covering the subject and attracting my attention to its evolution internationally. I am yet to pay that debt.

The comments here also drew my attention to how other sectors were suffering, and I made inquiries and talked with many people here in different sectors. It resulted in giving away about 90% of my income to different people as I was fortunate enough to work remotely and they were not. To go back full circle: it solidified the point of how important it was to have the means to do good, which is why I'd like to become confortable enough to help more people (thus, startups).

I recall many threads of where a product/service/startup got shut down / closed its doors. It's ironic because sometimes it's my first time hearing about that product/service/startup, and I often ask: 'Why didn't I know about that earlier?'. Turns out it's just as well I didn't hear of it before because they're no longer sustainable or operational in the long run. This is why I only concern myself with 'stayups' or products and services that you know instinctively (and through research) they are in it for the long haul.

Out of curiosity, did you come up with 'stayup' or where did you come across it? I'm really liking it.

I recall some article from years ago mentioning it. I didn't coin it. One has to ask: where do all the startups 'end up'?

Mostly general consensus/sentiment, that start-ups are not worth working for anymore due to investor/founder greed in terms of stock options allocation.

Have you seen any models for equity allocation that you think are fairer to employees?

Gail Goodman's How to negotiate the Long, Slow, SaaS Ramp of Death

https://businessofsoftware.org/2013/02/gail-goodman-constant...

Not an HN thread, but HN videos. Particularly Michael Seibel's videos while jogging were very insightful. A lot of what he said in those videos were so obvious after the fact that it's crazy how there are teams that do the polar opposite and fail. I highly encourage you to watch them all.

got a link to those videos in particular?

Here's one of my favorites. https://www.youtube.com/watch?v=C27RVio2rOs

It's really good!

Thanks!

Awesome, love it, can I go back to 2018?

Yeah a link to that would be great

https://www.startupschool.org/curriculum

https://www.ycombinator.com/library

What I Wish I'd Known About Equity Before Joining a Unicorn

https://news.ycombinator.com/item?id=13426494

I've seen a lot of people lose a lot of money because they bought into the "value the equity at zero" mentality. It sure sounds great and edgy to be blasé and just take your pay, but if that was true, you'd be better off working at FAANG 99% of the time.

IMO if you work for a startup company, you should only do so because you believe in it, and if you believe in it, you should exercise your option as fast as you can, perhaps with an 83b election if you can afford it. Otherwise what's the point of taking a job at a startup with a lower TC and higher risk outlook than a FAANG job?

Hence, I think:

  - only join startups you strongly believe in, 
  - only join startups that offer good equity package, have raised good rounds, have healthy cap tables,
  - get as many options as you can, 
  - exercise them as fast as you can,
  - work hard to make it worth something,
  - leave if it doesn't work out.

That's kind of the whole point of joining a startup. You're joining a bet, where you've got a significant chance of influencing the outcome.

Sorry if this is a dumb question, but why would you want to exercise your options as fast as you can?

You pay less in taxes if the options are valued for less, which they usually are the earlier you exercise them.

Lower tax bill, as you need to pay taxes on assumed gain when you exercise your options, based on the latest 409a valuation of each share. The lowest such valuation in a startup is usually early in its life, and during your tenure, the valuation should go up steadily (or something's horribly wrong with the company's business) and thus your cost to exercise increases over time.

Another reason is more practical: it's much easier to exercise your options when the tax bill is lower and you just got a job/while you're employed (i.e. you're more plush with money), than when you're quitting/been fired and have 90 days to figure out where to get money from. Basically, it's better to be in control of when you buy, than being forced to buy or lose out.

1. You pay tax on the difference between the current valuation and your strike price. So if you exercise before new valuation events you save tax dollars, potentially a lot of tax dollars.

2. If the company gets acquired there are several mechanisms founders and investors use to wipe out options holders. It is harder to wipe out common stock owners. If an acquisition event takes you by surprise you may not have time to exercise.

3. You may get laid off, decide to quit, or get fired, and have only a limited time (3 months, often) to exercise your options. That might be a bad time for you to spend the case, so you may want to do it now while you are in a better position to do so.

Good point about (2), I think that's also overlooked.

Regarding #1, won't you have to pay tax on the gains anyways, if you ever sell the stock?

Sorry, I missed this when you posted it. Yes you're right, you certainly will pay tax. But you'll have the proceeds from the sale to pay it with. When you exercise options for (possibly non-liquid) shares, you have to find money to pay the tax elsewhere.

If you can exercise and immediately sell the shares, point 1 isn't relevant.

> but if that was true, you'd be better off working at FAANG 99% of the time.

Pretty sure 99% of people actually would be better off working at FAANG, or at least the 99% number isn't far off. FAANG promote quickly so salaries will climb and you'll have millions in the bank by the time a start-up would go public, I doubt many start-ups beats that.

The main reason FAANG employees don't have those millions is that they consume them as they get them rather than invest it and then get all that money at once after 6 years.

oof

A comment on HN how much someone hated commuting. Living now 2 km close to workplace. Get there everyday by bike. Love it!

I got a little burned on that one. Moved to a more expensive apartment that I could walk to work from, then the pandemic started 3 months later. Oh well.

All the discussions around the relationship between burn rate (personal and company), running room (personal and company), and being "default alive".

I've seen enough startups from the inside and outside to now know that: - there are all different paths to take to success - you can do a lot of things wrong, bad things and still be successful - the power of, and value, of cult-like fanatical users / supporters - marketing looks very different these days, but brand (what the outside world thinks about your company) is hugely important

There's been dozens of HN threads about this article, and it taught me much about the mechanics of making something that grows out of essentially nothing http://paulgraham.com/ds.html

This question I asked when YC company Amplitude went public a little while back: https://news.ycombinator.com/item?id=28700409

It confirmed that these days if a startup is successful the founder gets almost all of the reward, the first handful of engineers get a few million bucks, and the thousand+ people that follow simply get a regular salary. There are only two real paths to wealth in tech nowadays: start your own thing or work for FAANG.

Came here to say this. First engineers and founders usually make most of the pie.

Anecdotally, I work for an engineering firm and within 4 years I was able to go from zero savings to a quarter of my retirement. It can be miserable sometimes, but I'd take miserable and retire in my 40s at this point.

I joined a startup a few months ago, and yeah...I don't know what my stock options are potentially worth.

I can buy 20,000 shares at $3/share over 4 years. We got a second round of VC funding in Spring with a valuation of $250M. Let's say in 5 years, we go public, I had exercised all my options, and we end up being worth $25B. Would that mean the $60,000 I spent on shares would be worth $6M?

Would another round of VC funding affect this?

Or is there more information needed that I don't know and might not have access to?

Usually new funding leads to dilution of existing investors, you might want to read the offering of your second round for relevant details.

There is simply no way to tell. It all depends on how many shares there are at the time you sell. VC funding can change this. Do you know how many shares there are today?

If there is a 25B valuation and 25B shares at the time of sale, your shares would be worth 20K (and you overpaid).

If there is a 25B valuation and 25 million shares, you would be worth 20M

According to the stock options plan document, there are 2.5M shares reserved for issuance for the plan. Of course, that says nothing about total shares.

This might be helpful:

https://carta.com/blog/equity-101-stock-economics/

If your options were priced at the $250 million valuation, and no dilution occurs, the stock value would be 3$*IPO valuation/$250M.

Dilution events are pretty common, even for companies that are revenue positive.

I would recommend viewing the options as a potential windfall, but not part of any compensation evaluation or financial planning.

Patio11's posts on the Bingo Card Creator journey, particularly the methodical and quantitative way he went about his marketing

The one that said "Dropbox will never work because I can do the same thing with rsync"

My favorite is "What's the point of this product? This is very easy to do today. All you have to do is (insert very complex series of steps and tools)"

I feel like this is the story of everything that succeeds wildly.

be ware that following this story does not necisarly yield success

I came here to mention that one! It was a really critical moment that helped me realize I will never please 100% of people all the time. As soon as I have that (silly) idea up, I started really creating…

There are lots of comments like that on HN every day.

I feel like a lot of them are just people who see something getting praise and need to put it down to make themselves feel better.

Seeing other people be clever somehow threatens them.

I think people believe that the technology is what makes a company rather than the customers and overall market. I believed that for a while too. I could build this better than X company and I did, and it sat there doing nothing because I couldn't market / sell / monitize it. There's a hell of a lot to building a company and customer base; the technology is only part of that.

I think it's more a matter of a lot of HN users living in an echo chamber and not realizing that the extreme majority of the population is non-technical.

Good luck guiding grandma through setting up rsync.

I guess it's this one?[0]

For me, as a tech-guy, rsync (or similar) _is_ actually better than Dropbox. :)

[0] https://news.ycombinator.com/item?id=18255896

That's not what the comment said. It has been unfairly misconstrued.

What BrandonM actually said was that he had "a few qualms" about Dropbox's YC application (which is what the word "app" meant back then) - i.e. he was worried on their behalf and wanted it to succeed. He was clearly intending to be helpful. He had a nice exchange with Drew, as anyone can see if they would read the replies (https://news.ycombinator.com/item?id=9224).

In 2007, the conventional wisdom was that file sync was a solution-in-search-of-a-problem that would never be a successful business because the idea only appealed to technical users. Joel Spolsky famously wrote a blog post mocking technical people who wanted to work on file sync. That's the context in which the comment was posted.

That turned out to be totally wrong, but it took the success of Dropbox for everyone to know that (and then forget that anybody ever said otherwise). Brandon's comment ended up getting stranded like a little island in an ocean of hindsight fallacy.

It's hopeless, of course, to fight the internet once it has decided on a meme. But it bugs me when unfairness get repeated, especially when someone is being scapegoated, so even though it's hopeless, I still post about it from time to time.

https://news.ycombinator.com/item?id=28293146

https://news.ycombinator.com/item?id=27068148

https://news.ycombinator.com/item?id=23229275

https://news.ycombinator.com/item?id=24366316

While I like the meme, this is the first time I've heard the context, so I appreciate that you wrote this.

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