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| Beware of Unicorns! http://skia.deviantart.com/art/Unicorn-287148950 |
Haven't posted for a while, having chosen to contribute to InfoQ.com. My first time with that site and I had a great time. I found the experience edifying. I had to do something before every company manager thought it a good idea to follow the Bezos/Amazon employee "hunger games" model. They're not going to get away with it; not with the feedback I've gotten. People are seeing through the "I'll work to death and maybe get rich" scheme more and more. Again, I don't judge people who work there as long as they're being mindful about the opportunity costs of doing so.
In that vein, I've got to tell you about the dangers of unicorns. Unicorns being the new jargon for private companies estimated to be worth over $1B USD.
First lets be honest - most startups aren't unicorns and never will be. That's why they chose this as a metaphor. They're rare to the point of being a myth. If you read No Exit from my friends at Wired.com, you see that most folks in this non-unicorn space are getting their rumps kicked trying to "crush" it - they sacrifice health family for the possibility of being a unicorn, for the hope of becoming ridiculously wealthy at a crazy-young age.
So if you get to Unicorn status, you're good, right? Even if you don't actually found a company, being on board early will get you a sheaf of options that will carry you to the financial promise land, all the while maintaining the social cache of being part of a .com.
Well, according to the latest piece in the New York Times tech section , it turns out that cache does not equal cash, at least not for the non-execs at startups.
Before I go there, I want to know - what is it with their tech staff? They're after the Valley in a big way or something. Maybe someone from the LA Times needs to do a hit piece on Wall Street or something.
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| Peter and Maria Hoey |
There's the pic from the article When a Unicorn Start-Up Stumbles, Its Employees Get Hurt, by Katie Benner. I think it says it all, but the article is a good read. It details the sale of Good Technology, a unicorn that was sold to Blackberry (wait, Blackberry is buying things??)...anyway, yes sold to Blackberry for not-so-unicorn $425M.
There's a fairly detailed rundown of the numbers, and how those folks (aka chumps/regular people) get common stocks are completely devastated in the game of numbers. But how? This quote sums it up pretty well:
"Investors and executives generally get protections in a start-up that employees do not. Many investors have preferred stock, a class of shares that can come with a guaranteed payout. Executives frequently get special bonuses so they will not leave during deal talks."
But what I learned from this article is that common stock holders will take withdrawals and get taxed on the estimated valuation of the company. So, if the company doesn't get sold for something around that price, the hurt is delivered to the people who delivered on the dreams of the execs who started the thing.
“It’s not unusual for employees to be wiped out while venture capitalists make money,” said Dennis J. White, a partner in Boston at the law firm Verrill Dana, who has studied deals like Good’s. ....The high valuation increased the paper value of employee shares — and thus the income tax bills levied on their stock when they received the stock grants, or when they bought and sold shares. To pay those taxes, some employees emptied savings accounts and borrowed money."
So that quote kills me. This happening is a common occurrence? #@$!@#$ ! Can you imagine? My brief foray into this paper money was uneventful - I had paper, they never sold, and I left. So no damage other than the tons of time I poured into the firm just to have it sold. But these poor folks had no chance. They are handed paper, perhaps millions, they pay taxes and borrow money to maintain that paper, and then the paper vanishes. This is where law makers need to fix the IRS rules, because this is a trap.
Then there's this:
“We listened to these executives and, in the end, incurred huge tax bills because we trusted them,” Mr. Parks said. “Employees essentially ended up paying to work for the company.”
So, that's it. Its the perfect coup - employees that pay for the right to work at a company. They say there was a broken glass wall in Good's headquarters - they're lucky they got away with just that. And as for the lawsuits and such - who can afford such action after being wiped out by the IRS?
Why post this? What does this have to do with LifeSparcs? Well, if you're a LifeSparc-er, you're working at Good, and you hope that your taxes work out, but you draw a line. You realize that this company is a dream of the founders, who are going to work insanely and work you insanely, and financed by the VC firms, who have no empathy for you whatsoever. Neither groups are going to feed your soul. You realize that spending time pursing the things you love that do have empathy/love for you ( dog, family, hobbies), and you make time for those things, or you leave the company. You set boundaries where "the job" cannot pass, so you can be you regardless of what happens.
These employees couldn't have known how this was going to go, but if they were living the examined life of a LifeSparcer, they would at least have perspective that their work life is not their only life.
(I have another version of this on medium here, just for the fun of it.)
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