I agree with Chamath. I think it's great that he's speaking up for early employees who can put a lot of sweat into the company they're working for. I'm a huge fan of air bnb and what they're doing. But this along with how they handled the user getting robbed situation earlier this year at first is starting to be troubling. At what point do we consider these guys to not be a great example of a startup anymore? After all it's not just growth but ethics that matter.
Reply · 10 · · 21 hours ago
Yves Greenwood
I totally disagree with Charmath. Dividend to common stock? That is soooo amazing that I can hardly believe it! How could no one but founders have common? That is AWESOME! Basically, it is saying anyone who has any common shares gets paid, and guess what? WHEN you vest, you may get a dividend too!!!
If I were an employee I would be STOKED, since paying common dividends seems to be what they are going to do moving forward, this is a GREAT STRATEGY for attracting TOP TALENT.
Man, if I am an employee it means I may GET LIQUID on my common? AWESOME. Shit, that means if I vest anything I could be getting PAID. SWEET!
Reply · 2 · · 19 hours ago
Chris Hulls · Works at Life360
Yves Greenwood , my opinion on this topic aside, the issue is that most employees (aside from VERY early ones), probably have stock options, not actual shares, so they wouldn't get the benefit of the dividend. Future employees almost certainly will not be getting straight stock grants.
Reply · 3 · · 18 hours ago
Robert Ross · Duke
Yves Greenwood, with respect, your comment is pretty naive. A common dividend of this sort for a high flying VC backed startup is definitely a one off for the founders to take money off the table rather than establishing any ongoing precedent for other future employee shareholders. Everyone's points about stock options vs stock is spot on. The founders generally have restricted shares. Even top execs generally just have options. While they might also have an early exercise, it's not generally the case. This definitely is not a great strategy for attracting top talent - rather, it's a great strategy to *lose* top talent. If you're a rockstar engineer with stock options and you see this invested money not going to expand the business, but rather to the founders' pockets, you might start thinking about what other business decisions...See More
Reply · 8 · · 18 hours ago
View 3 more
Erebus Baltazar · Harvard University
This is the first reasonable startup I have seen. Airbnb, while having as absurd a business model as the rest (which is to say complete lack of one) has what all successful startups have in spades, a large "social" mystery and the capacity to enthrall idiots with money (ie the hordes lead by Punk'D idol / "dude where's my car" turned Warren Buffet in all but substance). The only difference being they don't believe their "business model" will remake the world in their own image. Our at least they'd like to enrich themselves... just incase. The author of this "leaked" document is the deluded one, not the ones who did the diluting. The Zuckerbergs of the world could learn from these philosophers.
Reply · 5 · · 13 hours ago
Erebus Baltazar · Harvard University
Oh and can we substitute the word "liquidity" for "sweet cash" since almost none of you using it do so correctly and/or went to business school, and the ones that did probably dropped out to found some sort of dotcom too late to cash in on the last bubble. Also the words "strategy", "metrics", "vested", "VC", "capital" and phrases using them such as "get liquid", "EBAY model", etc. should likewise be dropped. Especially when used in the same sentence with "awesome shit." The only one you're fooling is yourself, which isn't the accomplishment it probably now seems. We all do it, you just seem to do it to a degree the rest of us never thought possible.
Reply · 1 · · 12 hours ago
Marcus Ogawa · Top Commenter
I find it interesting no one has brought up the possible serious tax consequences to doing this. That is the crux of this fail if you ask me. Dividends are ordinary income which in CA combined with federal is around 46% on 500k+, if they actually sold stock their long term capital gains tax implications would be 15% federal, ~11%CA for net 26%. Yes they would be diluted, but they'd actually keep an additional 20%, and they wouldn't create tax implications on the value of common stock by setting precedence on distributions to common, making the next round 409A valuation of common stock likely astronomical for them moving forward. This is an issue because it means future grants post this round of funding could almost always be options valued under the water, therefore effectively worthless to the new hires they issue them to unless they find a way to distribute to common by insulating common into two separate series of shares in one class.
Either way though, the idea that they aren't taking any dilution to get money off the table seems unfair to the ethos of the investor - entrepreneur relationship, and frankly speaking IMHO speaks ill of the investors approving it rather then the founders wanting it since all the entrepreneurs did was find someone on the demand curve willing to meet their price. I totally agree with Chamath here, dividends are not meant to be used this way and sets a bad precedence.
Reply · 2 · · 6 hours ago
Ted Wright
It seems very "facebooky" to say that investors don't add much value to a start up that "is working". I'm not sure that the Fred Wilsons and better members of Sand Hill road would agree.
And speaking of "self dealing and shady" Palihapitiya's e-mail could not be more self serving. He's trying to get a better deal for investors by keeping more money in the company by making it tougher/more expensive for founders to take money out. He's also directly asking the founders to dilute themselves further.
Where Palihapitiya wins is by making the play for fairness to other employees. There he is right on target. Like any good VC, Palihapitiya has aligned his interests with the greater good of the company. Hopefully airbnb will dump the 90/10 aspect of the deal and keep the dividend theme.
p.s. For the writer of this story, I'd be interested to know how "extraordinary" an e-mail like this is vs. being "extraordinary" that the e-mail was leaked. The e-mail reads to me that it is very matter of fact and something that gets done all the time.
Reply · 2 · · 13 hours ago
Bret Waters · Top Commenter · Founder at Tivix, Inc.
Great inside view of how deal structure works in subsequent financings. Having been through this a couple times before, the issue of keeping everyone's interests aligned is an important one. Everyone brings something to the table as a company is being built. And as soon people start to feel as if one group is getting preferential treatment over another, bad things happen.
Reply · 2 · · 19 hours ago
Serge Bronstein · Top Commenter · CEO/Founder at Inspyte.com - Be part of the Social Networking Revolution
whoever invested in airbnb is a moron, what they do is not even legal and anyone with half ounce of common sense can see that their business model stinks - the EBAY model DOESN'T WORK IN THIS CASE! the only way u can manage vacation rentals is by charging the renters some kind of annual listing fee and leaving it up to them to deal with the money and the transaction itself - the way VRBO does it.
Reply · 2 · · 21 hours ago
Michael Yin · Ohio State
I agree. Airbnb is feeling more and more like a pump and dump scheme where investors are hoping to eventually dump the company upon the greater fools, the investing public, right before the bubble pops.
Reply · 2 · · 7 hours ago
Micki McGuire
Well said Chamath! With all the shady deals and snakes in the grass on Wall Street, Politicians and some big Corporations as well, it's a sigh of hope to read that some people still have a core ethics that runs through your spine. Integrity is pretty important in my book, and it seems it's hard to find in America these days sad to say.. but true. Greed is what partly put America in the economic mess we're in today. I'm all for capitalism, and it's awesome to be number 1 as long as you didn't screw everyone to get there.
Reply · 1 · · 12 hours ago
Michael Yin · Ohio State
It's really sad to see tech entrepreneurs today are less motivated by a desire to change the world and more driven by naked greed. The Valley is slowly turning into Wall Street. How repulsing.
Reply · 2 · · 7 hours ago
Josh Miller · CEO/Founder at OurBuckeyeHub
These are the "job creators" that you're criticizing! :) They only want to innovate and create jobs for everyone!
Reply · 1 · · 2 hours ago
Charlie Pratt · Co-Founder & CEO at Gunway
Exhibiting character in the face of huge piles of cash isn't easy. But it's where the real gold is.
Reply · 1 · · 12 hours ago
Alex Castro · Top Commenter · Works at Microsoft
I don't understand why one needs to resort to name calling. What is the offense? Douche?
Reply · 1 · · 21 hours ago
Robert Ross · Duke
Hi Alex, nice to see you here, been a while. I think the commenters using the name calling are simply trying to draw attention to themselves and don't understand that it just makes them look like they don't have anything intelligent to say. To me it doesn't even make a difference whether Kara or Mike or Erick first writes about something like this. Scoops are nice, but this isn't exactly time critical news either way. I actually read about it in all 3 places and its interesting how each tries to add something different to it. Good luck at Limelight.
Reply · · 18 hours ago
Robert Ross · Duke
One other thing to the people trying to dis Erick for "news" that Kara or Mike already wrote about - different people like to sometimes see the same news where they like comment - ie. in the social/online community they want.
Reply · · 18 hours ago
Michael Mitchell · Top Commenter
this is old news...
Reply · 1 · · 21 hours ago
Michael Burshteyn · Top Commenter · Atlanta, Georgia
Arrington already scooped this hours ago.
Reply · 7 · · 21 hours ago
Andrew Brackin · Top Commenter
Uncrunched!
Reply · 2 · · 20 hours ago
Muhammad Huzaifa · Top Commenter · Chief Execcutive Officer at IKnowl
http://www.cloudave.com/1616/should-founders-be-allowed-to-take-money-off-the-table/
Reply · · 11 hours ago
Bernard Moon · Palo Alto, California
Props to Chamath for his position and sticking to it. I do disagree though with this general trend of letting founders cash out such large amounts before seeing the light at the end of the tunnel. I would bet in hindsight (maybe 5 years out) that majority of the companies and investors that let this happen will regret it because it created too much of a disincentive for many of the entrepreneurs or because the companies actually needed the cash later on. Especially if companies like GroupOn flame out there will be more lemmings. I would be pissed if I was an LP in a fund that allowed the GroupOn founders take off the $400 or so million off the table and then they flamed out or became a hasbeen.
Reply · · 15 hours ago
Michael Yin · Ohio State
This is a troubling trend, founders taking money off the table before troubles brew and hawking their shaky businesses to the public. Once these founders exit, they're gone, and they can care less if the IPO performed poorly because they already lined their pockets, leaving investors and their vesting employees in the dust.
Reply · · 7 hours ago
Judy Shapiro · CEO & Founder at EngageSimply
Perspective is a great teacher. What is being disclosed here is that IPO fever is driving greed. It happened a decade ago and here we go again.
These ventures often often buoyed on the fumes of grandeur. Disclosure is always a good thing.
Reply · · 7 hours ago
Ilja Goossens · Amsterdam, Netherlands
I think neither of the involved parties will benefit from this so called 'leak'. Both are loosing credibility. Who can come up with the third party that will profit most from this situation?
Reply · · 3 hours ago
Matt Henderson · Works at Rangespan
Though I agree that the dividend approach was bad form, it seems highly likely that the investor leaked this email on purpose, to enhance his reputation. Which also sucks.
Reply · · 13 hours ago
Danny Page · CTO at Knackeo
I would not want to be the founders on Monday morning. That's going to be an awkward meeting, when it makes it look like they are trying to cash-out while they are hot. Not exactly inspiring.
Reply · · 21 hours ago
Daniel Gold · Carleton CA
why would they wait till monday lol
Reply · · 11 hours ago
David Traxler · Los Angeles, California
If these kinds of emails are being made public, taking some cash off the table seems to be the least of worries for Airbnb and it's investors.
Reply · · 9 hours ago
David Goldfarb · Los Angeles, California
It would be even easier if they use a vehicle like the Wedbush Securities private shares group.
Reply · · 11 hours ago
t_manifest (signed in using Yahoo)
Credibility, like virginity, is impossible to restore once it's lost.
Reply · · 8 hours ago
Narayan Babu · Top Commenter · Ernakulam
I should pin this up onto my wall, and I will never get carried away.
Reply · · 9 hours ago
Nandi Gurprasad · London, United Kingdom
Well said and positively worded Sir!
Reply · · 16 hours ago
sdfgsdfg sdfgsdfgsdfg (signed in using Hotmail)
Chamath's nose is amazing.
Reply · · 15 hours ago
Festim Malaj · Works at HM Electric LLC
Chamath, youre a good dude.
Reply · · 11 hours ago
Taylor Wescoatt · First Payments, now Incubation at EBay
Well done Chamath.
Reply · · 14 hours ago
No comments:
Post a Comment