Fungible sold to Microsoft for $190M, say multiple sources
blocksandfiles.com
blocksandfiles.com
What happened to the regular employees who believed in the company enough to exercise their options? I’m assuming they were paid way less than market for the better part of a decade?
Nothing? Just: “Fuck you, I’m eating.”?
There was a layoff in August.. Did they let the people they let go know that they were cooking up a deal that would make their vested options worthless? Did they put a time pressure on them to exercise their options after getting laid off? Did they give their money to SoftBank?
These are very rich men whose company failed. I can’t imagine cashing out while screwing over everyone I worked with along the way. I couldn’t do it. At least face your people and say “Sorry this happened. We’re all in the same place.”
I assume the founders don’t get anything out of this sale?
Why wouldn't they? They start by owning 100% of the company. They sell a % to investors - say, 50% for $300M, which is put into the company.
That still leaves them with 50% ownership. Selling the company - or their stake in it - for $190M will still mean they get half of that. On top of other things, like continued employment by the new owner and other enticements for them to either keep working or leave.
Disclaimer: this is armchair logic from someone who doesn't know how this works and lives half a world away.
They almost certainly won’t get anything.
> ... an unannounced incestuous funding round that had preferred equity and liquidation preferences, which was mostly the founder’s money.
Are you actually attempting to answer my question, or are you saying something unrelated?
Labor is compensated peanuts in comparison to capital. Neither is a charity, just that employees are materially worse off in these cases.
AWS (rightly) make a lot of noise about Nitro and the benefits of their architecture - I’d expect anyone who is actually in a similar position to be doing the same.
They are doing an AWS Nitro system for everyone else
> "Then along came Microsoft, with its need for efficient Azure cloud datacenters. We understand Redmond has no interest in selling Fungible’s kit [storage arrays] to external customers."
The article goes on to say:
> "In the absence of any other possible suitors and VC funding seemingly drying up, Fungible management, we are told, agreed to a lower offer from Microsoft than they would have liked."
So in the current funding climate, Microsoft was able to buy up this useful technology at a discount price.
i.e. company brought in a total of 30-40 million in investment at a 300 million valuation. sells for 200 million. they still sold for a lot more than invested.
also, for people still at the company, my observation from friends who were in that situation is that if they are buying the company for the talent, they get good retention offers.
In this case, yes, it could be that they are wiped out, but the employees got a salary and the investors will lose money overall. so the employees come out ahead of the investors.
> In this case, yes, it could be that they are wiped out, but the employees got a salary and the investors will lose money overall. so the employees come out ahead of the investors.
Except, and this is what a lot of startup employees don't really grasp, is that a VC is always widely diversified while an employee can't be. At any given time a VC will have lots of investments, and they should expect most of these to be relative losers. Employees, however, can only work for one company at a time, and for startups they usually take significantly under market rate given that they're taking a chance on their equity.
The equity is a "bonus/lottery ticket" for the future.
IMO, You work for a startup because you get to work on exactly what you want to work on in a way that would be more difficult in a larger company (in terms of technology, the amount of effect you can have, the learning experience....) and the salary is sufficient for your goals and needs (i.e. support yourself in a lifestyle that you are content with and able to put sufficient savings away for the future so that you will be able to afford the things you want/need in that future).
If the salary isn't sufficient, you shouldn't work for a startup banking on the equity, as you can't bank on it.
If the experience of what you will be working on isn't special and you could work for a larger firm that pays more, you should work for them, not the startup, as you aren't getting any extra value to make up for the lower pay from the startup.
At the end of the day, a startup that goes to 0, the investors lost all their money, but all the employees got a salary for the time being there + whatever growth/value they personally got of the work that they can take to their next job. If the startup doesn't go to 0, but goes to under invested dollars value, it is effectively the same thing, the equity employees were issued is 0 and the investors have lost money, while the employees at least are net positive on their salary.
I really think people who say to work for a startup to take less salary because of the lottery ticket that is equity are making the wrong decisions. I'm saying that as someone who is now on his 3rd non public company, where the first job didn't work out for me (and the company was then sold at a down round, though more money than they had raised), the second company ran out of money and was "aquihired" by a larger firm and "Hopefully" this third company will go public (though current market trends make that a hazy crystal ball for the foreseeable future). But none of these jobs I took because of the equity, I took them because the salary was sufficient for my goals/needs and I got to work on things I really wanted to work on in a manner to have an impact that I couldn't have elsewhere.
Nowadays typical to have no participation multiple, just 1x preferred shares ("first money out"), so you can add up the money raised, which is often ~public
Ex: a co that raised a total of $100M on $10M revenue... returns you nothing. They can call themselves a unicorn but that's between them and the investors. The investors, through preferred shares, own all the current market value.
Also, ultimately, this is all funny money. A company no buyer wants is worth nothing. Likewise, if some sort of existential PR bet by the acquirer, the acquisition $ can be magnitudes more than any sense of team/IP/revenue $, like the early acquisition of Cruise.
People should really be more aware of this, but as usual, everyone only focuses on the winners.
(Then you go and apply it elsewhere, for a larger salary and RSUs that actually are worth something on the market.)
It is discount time
Buy cheap stocks and cheap companies