I'm curious how it works from a technical standpoint. If they invest, do they not own shares of the company, and then during the sale the shares are sold, did they just gift the shares back to you personally? Does that have tax implications?

Investment vehicle was a SAFE. They basically cancelled the SAFE as part of the deal. We've had carryover losses for years, so from a tax perspective, there was no hit on either side.

Wouldn't this count as a liquidation event and thus give them the right to purchase shares at the price that the buyer is purchasing them at?

Depends on whether it was a stock sale or an asset sale.

Makes sense, thanks!

Now that you mention it, you're right, maybe some of that extra $300k went to the employees? I don't know because I wasn't in the room. I'm curious how much money employees got, and why $3.7 million was enough when $2.9 wasn't.

That entire $300k went to employees.

As for $3.7 vs $2.9...that was basically the number that, to oversimplify, would roughly give the outcome I wanted for "retirement" when it comes to investment interest over the next 50 years.

Basically, it's the number I felt comfortable with to not instantly feel like I needed to get back to work in a few years.

He worked out a win-win deal that gives them publicity and him $4M. In gaming terms, I believe this play is known as a QUAD KILL.

So what did employees get?

Salaries? https://baremetrics.com/blog/why-we-spent-250000

> We aren’t spending Silicon Valley-amounts on salaries, but we’re certainly not on the low end. From the perspective wanting my team to love where they work and not have to worry about money, I’m very happy with the salaries everyone gets.

For a few years before I sold my small (UK) company, our employment contracts had a bonus clause in. It guaranteed a bonus payout from a pool of 5% of any future sale, based on a multiple of years service (up to 5) and salary at the time of sale.

We sold for a similar sum and the bonuses were pretty small by SV standards - a bit more than £20,000 for a few, down to a few £00 for people who had just joined (maybe 50% annual salary for a few).

Me & my partner had a fishy earnout clause over 12 months, but I got us pleasantly fired after 3. Half the staff got made redundant after 6, which I don't believe was a surprise to any of them. Nobody buys a business for its cosy culture, or sells one expecting it to stay.

I think it's right for founders to be up-front about the likelihood and consequences of an exit, which is why we put it in our employment contract. But IMO more than 10% would be very generous for these ordinary private buyouts at 4-5× profit - no rocket ship valuations. At least that's clearer and more certain (and less tax efficient) than the kinds of games people play with options & rounds of funding.

UK tech companies, salaries & employee expectations are a whole different world from what's discussed here. Maybe Baremetrics was closer to that world than SV.

(In another life I wish I'd looked into what our old customers Torchbox did last year which is form an employee-owned trust and sell to that - https://torchbox.com/blog/not-selling-up/ )

Depends on the employees and when they joined and if they exercised stock options or not. Big range from a few thousand to over $80,000.

Did you also take a salary during these years?

$80k for how many years of work? Unless it’s one, I’m with the parent. I’m sure it’s all legal and ‘equitable’ according to the terms, but that’s peanuts of a return for somewhere between 4 and 7 years of work (based off a typical vesting schedule).

No, it's an $80k bonus on top of the salaries they got for X years of work, and they're all still employed as well.

We don’t currently know what their salaries are, but it’s pretty common for startup salaries to be 50-60% of normal salaries. The rest is typically LLC stock grants. It’s done this way with the promise of “when we sell” those stock holders will make bank. $80k isn’t ‘bank’. Especially if Baremetrics was following the startup-standard salaries.

Anyone taking a startup job on a 50-60% of a normal salary without several percent of the shares is doing themselves a massive disfavour.

Most of my startup jobs have paid market rate. The shares and options have compensated for the risk, not a lower salary.

I'm sure some accept lower salaries, and certainly the salaries won't be comparable with the very top end of the market, but most people don't work in the top end of the market.

A startup that tried talking me into a massive cut without offering me basically founder-level share amounts would be an instant red flag.

All indications are that they were operating on a profit basis, not a growth basis, so I think it's a poor assumption that anybody was being paid a half-salary. As the post states, they're keeping their same compensation going forward, and all are choosing to stay, suggesting it's very satisfactory, and has been all along.

> All indications are that they were operating on a profit basis, not a growth basis

From the founder himself:

> We've had carryover losses for years, so from a tax perspective, there was no hit on either side.

I realize that tax losses can differ from cash losses, but are you so sure about that?

I mean, that's somewhat my point? They were not pursuing rapid growth. From the post:

We’re also a company that has purposefully operated right around breakeven for years. So, unless you’re a “strategic acquistion” that throws acquistion multiples out the window, a slow-growth software company without lots of profits and a product that’s technically quite complex is ultimately just not going to get a huge multiple.

It's peanuts, but it's also REALITY. Few people get big windfalls working for startups as employees or even founders, but maybe you get a little bonus on top of your salary if there's an exit.

Few employees may get a windfall in reality, but it doesn’t make it easier to see (nor does it justify the founder’s choices).

Those employees are just as responsible for the company’s success as the founder is; it sucks to see them get shafted while the founder walks away with “fuck you” money.

Agreed, which is why it's good that this stuff is being shared. It's a datapoint to consider for those of us as we make career choices. But let's face it, if we are not founders, then we are just "the help".

And without “the help”, most founders (OP included) won’t make it to the sale. You can’t scale without “the help”. You can’t grow your market without “the help”.

To badly paraphrase someone: “The idea isn’t what’s valuable, the implementation is.” That implementation is probably >90% thanks to “the help”.

There's a sense of entitlement here that's not sitting well with me. Don't get me wrong, I think employees of a "startup" deserve to get some sort of payout during a liquidation event, but I think that payout should be directly proportional to how much risk was assumed.

Did they take a full standard salary? (Doesn't have to be SV 100k+ salaries, but standard for whatever is paid in their area). Did they do more than just code? etc etc

By your logic, the butcher who worked for market wages in a meat processing company should get a big pay day because Nestle decided to buy them.

The point is not that founders don't take on more risk than employees. It's that that software engineers fresh out of college are not good at evaluating risk adjusted returns. If they were, they'd realize that the current market rate for joining a startup is a bad deal, thereby forcing startups to up their equity compensation. Many a starry eyed new grad has been lured by tales of riches from a startup founder / snake oil salesman.

There's a vast difference between a butcher in a meat processing facility and a trained professional software developer who is responsible for creating/supporting/etc your software.

As for entitlement, what entitles a founder to get ~50x the payout of their employees? Especially when they're also taking a SV level salary (not living in SV) and spending VC money.

If you don't like it, become a founder yourself. For better or worse, the reality is that maybe 5% of developers out there have the stamina, the ingenuity, and the risk tolerance to build a business. Speaking anonymously, as a person who started a business ~12 years ago that employs 17 people. The stuff you have to deal with non stop as a founder who is developing product, working on HR, working on code, working on infrastructure, working on the career growth of your employees, all the while also engineering a business that can in theory run itself without continuous micro-management, is insane. Not a single one of our employees, even our high producing hustlers, do half what my founder and I do on a weekly basis. You have to be a master of everything, because the moment you aren't the lead expert in the room, someone gets you off the rails. Running a small software based business producing a customer facing product is insane.

Add to it the last four years of "culture" growth leading all west coast tech workers to demand you add 10% overhead to your business to advance diversity, equity, and inclusivity, which in reality is just advocation for the right kind of politics to be brought into company culture, and you get a crazy stressful soup for any founder.

I actually very specifically chose the butcher example, and no there isn't. At the end of the day, a butcher, like a software developer can be trained to be good. Initially a butcher would ruin meat and cut into profits by incorrectly making cuts. Over time the butcher can and will get better. Far fewer mistakes towards the end of the career. Same with software engineers. After a point this comparison breaks down, but at least up to here it's comparable. Self taught or not, many educators have proven that good engineering can be taught and practiced. Over time everyone gets better if they care enough. Not everyone can be Donald Knuth, but no one's looking for Donald. Most start up founders just want competent engineers.

Moving on to your second point about entitlement. Of course the founder is entitled to 50x the payout. You seem to be severely discounting risk. Did you see this founder's list of other failures?[1] They can pay themselves whatever they feel is right. They took the risk, failed multiple times, and finally got lucky. Of course they can reward themselves how they see fit. There are so many founders who never see the reward and end up with worse careers because they only kept founding companies rather than choosing a "stable" career. To me it seems like, in your view, the guy who didn't take the risk founding companies and got to join a "sure" job by joining a rapidly growing startup gets to be rewarded comparably to the guy who started something, working, spending years not sure where it was going to go. Why would anyone take the risk of starting a company? I'd rather join a fast growing startup if my reward is quite comparable to the founder's. Low risk, high reward.

[1] https://joshpigford.com/projects

If Google can reward a cook, why can't a meat processing plant reward a butcher? Masters at their craft deserve to be rewarded when businessmen rely upon them to succeed.

Google can reward employees because they make monster profits.

If you can, you should get a job at Google and get a great salary (which is still a tiny sliver of Google's monster profits).

If you can't then you have to settle for lower paying job at a company that doesn't have monster profits like Google and therefore cannot pay you outsized salary.

Employees don't "deserve" anything other than the market salary.

It goes both ways. Employers don't "deserve" Google-level programmers for half the salary that Google is willing to pay. And I'm sure they would love to get great talent at reduced prices just like you would love to get great salary regardless of your talent and contribution to the business.

The market salary happens when both parties work to advance their self interest. "deserving" has nothing to do with it.

It's all good until founders understand that "we are just the help". They are the ones with the most risk, and they cannot simply walk away to a new job if they don't like how things are going. But a lot of founders put too much weight on early employees, require working as much as the founder, or require to take responsibility in things that far outreach what they were accepting to when signing a contract.

> They are the ones with the most risk, and they cannot simply walk away to a new job if they don't like how things are going

If a founder is spending VC money and paying themselves a SV grade salary, I would have trouble calling that a significant amount of risk.

The founder walked away with the ability to buy one nice house or two crummy ones in Silicon Valley outright. The outrage!

None of his employees were there that long from what I can tell. The initial employees got laid off I think 4 years ago and were probably there 1-3 years (who knows if any bought out their equity). Current employees were there 1-3 years. Only two current engineers from what I can tell. It also depends on how much salary they were paid as many people will take cash over equity.

I assume they also got paid in that time? You're making it sound like they've made a big sacrifice to (only) receive $80K at the end.

Most startup employees don't even get 80K. My last "exit" as an early employee was barely 20K. I doubt my current startup will be any better. I look at this as a "bonus" and not anything that was expected. The average startup employee will be lucky to get non-zero.

If you want "returns", you're better off getting a stable, higher paying job and investing the excess in public markets. You have diversification and liquidity.

So was the founder. SV level salary, per their words.

And, as I've said elsewhere, startup salaries are rarely on par with the industry average. Working at a startup is typically sold as "you'll be paid less, but if we sell you'll get a payout to make up for it".

It is pretty simple though, either they negotiated some stock based component to their compensation when they started and would be getting payout, or they didn't and they have been fully compensated by their salary.

Are you sure that Baremetrics employees were sold that? If not then what is your issue?

I got an incredible place to work for over 5 years, for an amazing company, and an even more amazing boss. I got paid well for it, and I also got a nice payout when the company sold. Don't worry about the employees :)