Hacker News Reader

Comment by KaiserPro | Hacker News Reader

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.

View on HN

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.)

Whoa, bummer but interesting. It can be hard to let go. Thanks for sharing.

sorry that happened to you. what taxes do you have to pay on a company making 0? just delaware franchise tax?

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.

Did your legal counsel at the time not mention that was a possibility?

Yes, of course. But given the circumstances we all believed it was highly unlikely he'd actually sue.

So many bitter aholes in this business.

That sucks. FWIW I had a sandstorm instance back in the day, and I think it was an idea ahead of it's time. The stuff you were trying to do I think got easier as containers became more widely adopted, and as enshittification has made the case for self-hosting more obvious. So... Thanks for trying!

Some of the mechanics on this one..

Generally, when a startup is acquired, people get paid in a number of tranches:

- First, debts get cleared in order according to debt types. This could be cloud providers, lawyers, employees who deferred salary, etc, etc. If there's still cash left..

- Then preferred (generally earliest) investors get paid back. Some investors will have liquidation preferences where they get 2-5X their initial investment. If there's still cash left..

- Then execs get their preferred shares cashed out. Depending on how many rounds they'd raised, they may own less than you think. If there's still cash left..

- Finally, general stockholders get paid. This is where most employees may actually get cash.

To further complicate things, some people could be in multiple places here. A founding exec may have lent the company money to get started, have preferred shares, and have common shares so they could get paid out in early levels but not at the end.

*There are WAY MORE nuances in this but the point is: You don't just say "total price divided by shares times number of shares = the cash you get"

$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.

$25k/yr can be decent living in some places.

In no place where you’re getting a 1M pretax offer.

Yeah but what if - hear me out - you move after you get the money?

Yeah man, I'm sure that's exactly what they meant when talking about a decent living for $25k/year.

Sure but not in North America, where i assume most readers of this site are from.

Just out of pedantry, all of Mexico is in North America.

Not in any decent places.

I read this in a British accent.

Sure, buts its a solid career break for a year.

When I was a kid (early 80s) the receptionist at my mom's company drove a Porsche and didn't need to work anymore because of a past company hitting it big. This woman wasn't a financial genius and didn't hardball negotiate with the previous company for her receptionist job, it was just Silicon Valley didn't used to be so gross and actually paid out to people.

1m isn't enough to really retire in in silicon valley

Or in any big city tbh.

Cleveland not big enough for you???

Cities like Cleveland have reasonable pricing built into their appeal. Without it, there isn't much left.

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.

Hell, roughly $600,000-800,000 is enough to lean FIRE, the last time I checked.

Sure, if you are single with no family and wiling to live outside California.

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.

You are supposed to invest and keep the money working for you. Adjusted for inflation, S&P 500 returns 6.5% a year. That alone gets you above the poverty line. Recall, this is inflation adjusted so your $600,000 is growing with inflation and the poverty line income also grows over time. This does not account for any swings.

You can't actually draw down 6.5%/yr, though, because of sequence of returns risk. The number that is actually safe (historically) is something like 3.5%.

Keep in mind that almost all of the FIRE advice available online has been written in a bull stock market that is almost 2 decades long (COVID drawdown is a blip on the 2008-2025 chart).

Past performance is not indicative of future returns. Do you know anyone still running a risk parity 60% UPRO/40% TMF (3x long S&P 500, 3x long 20-year Treasury Bonds) portfolio? That portfolio composition had massive returns, until the Fed started hiking rates.

The annual implied volatility of SPX is around 15-20%, if you want to withdraw 6.5% a year at 40 and have to restart your career at 55, be my guest.

A 40% drawdown on 600k is -240k which puts you at 360k, 6.5% of which is $23,400. Starts getting pretty tight if you need to sell assets for cash which reduces your future returns.

> Keep in mind that almost all of the FIRE advice available online has been written in a secular bull market that is almost 2 decades long

Most of the reasonable FIRE advice (e.g. https://earlyretirementnow.com/ quality) suggests a ~3-3.5% withdrawal rate, which has been measured using historical data way before the current secular market.

Is your take that even such withdrawal rate wouldn't work anymore, moving forward?

3.5% historically holds up over longer retirements (I ran a rough model and got ~98% success for 50 years). $21k is quite lean - you'd have to pick and choose luxuries like a car, no roommates, travel, etc. - but for a single person in many parts of the country it's doable. The big gamble is that Medicaid might get cut further, which would definitely force you back to work.

Yes, it’s doable if you rent a $500/month apartment/bedroom in a rural area or split a shitty $1000/month apartment in a mid tier city and don’t have a car, never travel, and don’t use medical care. My employer paid health insurance premiums are ~$15,000/yr.

That sounds like my personal idea of Hell, I’d like to be able to get treatment if I got cancer instead of being given a prescription for painkillers and a look of sorrow from a doctor that can’t treat me.

FWIW, I currently live in a shitty $1000/month apartment in a mid-tier city, not casting any aspersions on the living situation. But, I’ve lived in this same city without a car and it’s miserable.

Presumably, it would be cheaper if I had a fairly modern urban condo but my exurban property is a good $15K+ per year. Heck, I just had a kitchen fire and, even with good insurance, I'll probably be $50K out of pocket when all is said and done. I could probably have done things more on the cheap but didn't really make sense.

Lean fire on $600k-$800k is taking an extreme gamble on the cost of health insurance continuing to be subsidized way beyond Medicaid levels. Which you might be fine with, but it's a pretty big risk.

Unsubsidized healthcare in a lot of places in the US costs $10k-$20k per person per year. For early retirement that eats up like $400k-$500k per person.

This is why you don't retire in a country with private healthcare

Medicare isn't that much cheaper than exchanges although the cost decreases over time as you aren't earning significantly any longer. And lots of issues associated with moving countries.

My parents live in the UK which has free healthcare. The situation is dire. The waitlist for chronic pain surgeries are 3-4 years long. Lots of people, including my parents, have resorted to flying out to other cheaper countries to get treatment.

Is chronic pain an outlier here, or representative of wider trends? My uninformed prior is that surgery is not a good approach for chronic pain, and that the NHS is more likely to cover surgeries with a more clear-cut cost/benefit ratio

For things like hip replacements, cancer treatment and other physical ailments the NHS is pretty awesome. Some stuff it fails at I am sure, but as you say that is in part down to the way that it prioritises care based on results.

Because politicians have made it their mission to chip away at the NHS over decades. This doesn’t say anything about the efficacy of statutory healthcare.

But it’s quite relevant to the question of whether you can just assume that some country will foot the bill for your health care needs at old age, and therefore you don’t need to worry about health expenses if you retire early. Rising costs of health care systems are a serious problem in most developed countries. “Eh, I’ll just move to Europe in old age” is not really a comprehensive plan to ensure you get good healthcare far in the future.

It does. In every public-healthcare country, this happens. Because incentives are stacked against delivering to the patient and for increasing spendings. It’s the tragedy of the commons.

> In every public-healthcare country, this happens.

Outside of Canada and the UK this isn't true.

> Because incentives are stacked against delivering to the patient and for increasing spendings.

Germany, The Netherlands and Japan all have regulated competition models.

> It’s the tragedy of the commons.

Public healthcare isn't a free for all, its regulated, actively managed and budgeted.

I wouldn't use the Netherlands as a great example either. The family doctor model is slowly disappearing, replaced by private clinics. It is relatively difficult to get appropriate treatment for anything, and there are long waiting queues even for intake appointments. It has only been getting worse in the past decade.

> > It’s the tragedy of the commons.

> Public healthcare isn't a free for all, its regulated, actively managed and budgeted.

Not what I mean. It’s racist. Public jobs are being reassigned in a racist way to help whoever the currently-elected leader wants to favoritize, and, as the NHS ad says: “This is us, now”, clearly demonstrating a no-whites ideal (NHS’s intentions, not mine).

Public health funnels money from people who paid to get coverage, to, on one part, those would be rejected in a normal system (non-insured people) because it’s easier to say yes when it’s diluted; to to, for the second part, people self-selected by the group of currently-employed people, ie in the UK it means that normal people are selected with all criteria but protected classes (the legal term, “protected classes”, I mean) have priority for those jobs.

You may pretend the NHS is not racist, but the NHS actions speak for themselves.

Private healthcare is still much cheaper in the UK, so you're still better off retiring there. Might not always be the case of course, but I would bet the situation will continue to be better than in the US.

> The waitlist for chronic pain surgeries are 3-4 years long

The NHS has _many_ problems, don't get me wrong. But 3-4 years for "chronic pain surgery" isnt one of them. There are huge wait times, but 3-4 years is not representative. (Hip replacement times are ~4 months, much higher than it used to be)

Would I fly out to turkey to get a knee done? fuck no, half the problem is physio. Can you fly out and do it? you sure can.

This kind of doomerism is going to lead to farage getting his way and replacing universal healthcare for shitty half arsed insurance.

If you're willing to be fiscally conservative, go to a cheaper location, and continue working on side projects you don't need the payout at all.

The question everyone seems to be asking is "is the payout worth spending the first ten years of your career in the West Coast startup scene." Ten years is quite a lot of time to spend somewhere you don't actually want to live.

The converse(?) is also true; how easy is it to leave somewhere you've made roots (family, friends, community) in for a decade or two?

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

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.

>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.

$1M is enough to "Ramen Retire" in most of the US. If you're willing to eat noodles and make some lifestyle sacrifices, it's kinda sorta doable.

For majority of the world population 1M is amount they will never earn through their entire life. And they live just fine. I'm sure anyone can have a really nice retirement with one 1M, just not in the US.

Don’t retire in Silicon Valley then

Reply on news.ycombinator.com