How to go down with style
He spoke with all the employees and told them exactly what was going on. He made found other jobs for many of them. And paid everyone full compensation plus some extra benefits (like health insurance.) The employees did a thank you barbecue for him, completely on their own. The price was splitting with the other founder, to sell everything up to his car and some personal assets, and go back to basics in his personal life. His wife left him.
Not many years later, after the recession, he decided to set up another very similar company. Getting credit was trivial. Setting up a workforce swift as several key former employees joined in even without discussing salary. Within months the new company almost wiped out the competition. "His word means a lot to us." By then he had a much happier and younger girlfriend.
I've seen it with my own eyes as I was a small partner.
The competition was hated by knowledgeable people in the trade as they didn't pay salaries for months and then either went bankrupt or just fired most people anyway after many broken promises. They defaulted in their debts so their creditors weren't happy. And the few remaining customers during the recession had a terrible service, in particular they were left in the cold in many cases due to the chaotic situation. There were just too many competitors for only a handful of clients.
Think twice before passing forward your pain, be it by inaction or by delusion. Nobody will judge you if you can't kill a gang of Goliaths. But everybody will hate you if you lie and fail them.
DISCLAIMER: This story is not related to Silicon Valley and I don't have a company right now (was incorporating.) It is just a lesson to counter-balance some dreadful advice seen here on going on no matter what. It isn't my place to tell anybody they have a chance or not. I'm sure investors, clients, creditors, and experienced entrepreneur gurus (like PG) can advice you on that (just like my mentor was advised in the story.)
The Common Shareholders (all of the employees) had their options completely wiped out. Totally worthless.
The preferred shareholders got their money out (which is fine, that's they are called preferred shares) - but the CEO, and a few of the founders who were no longer with the company, received multi-million dollar handshakes, even though they were common share holders. This was a Kleiner Company.
Lessons learned from this:
The CEO, regardless of whether he is a Common Shareholder, is not in the same class as you, and will be given preferential treatment. This particular CEO will be remembered by roughly 120 employees who have spread through the valley 4 years later, as the asshole that he is.
If you are a founder, you still have leverage in a sale, even if you aren't with the company. Keep your lawyers close by if a deal takes place for a company that you helped found.
Worker-Bees - Remember where you are in the feeding chain, and don't trust Kleiner to recompense you when they are exiting.
You just made me and every other female/over 30 reader feel like shit. If you think we all get worthless as we grow older, have the decency of keeping it to yourself. Especially if you are going to expound the moral virtues of treating people right.
"Think twice before passing forward your pain, be it by inaction or by delusion" indeed.
The girlfriend was a successful entrepreneur all by herself. And she was 40. Far from a young trophy girlfriend.
And I think it's wrong to measure how much you are worth by looks in the first place. My mistake was mentioning age, but note I didn't say she was prettier (she wasn't.)
(And you got my up vote, you are right.)
now you did.
just sayin'
The man's wife was wrong to leave him. The younger and prettier woman was smart and fortunate enough to have found a worthwhile man.
It made me feel good actually, some woman leaves him FOR DOING THE RIGHT THING . . . but then, eventually, why, he meets a great woman who is in many ways (including young and pretty) better than the other one. How wonderful! Good for him! Good for her!
I love it when someone who does the right thing is rewarded.
Would it have been better you think if he had remained single, or if he had ended up with a wife that was not as great as the one that left him?
I think it wouldn't have been mentionned in the story then. Still a valid, if rethoric, question.
I like that story, wish there were more like it!
To succeed in love, find the one that loves you at your worst. That's my two cents.
Absolutely.
Been through that BTW, so I know how that works.
Doesn't the Judeo-Christian wedding ceremony include the vow (paraphrasing) that people stick together in good and bad times?
Finding out that your worth as a mate to someone depends on the current bank balance is one HELL of a rude awakening. Great learning experience though, I would not have it any other way.
Hahaha, over 30 isn't old, women are just to wrapped up in appearence, because hey, if your husband can't make money, you gotta find one that does right?
In the case, all of the company's assets were sold and the balance paid to workers made redundant by the closure of the company's plant. The court found in favor of the plaintiff, a minor shareholder.
Put simply, Directors must act in the best interests of the company, even if doing so is to the detriment of employees.
Can't speak for California or other US jurisdictions, but it's certainly illegal here in Australia.
The post uses the phrase "And paid everyone full compensation plus some extra benefits (like health insurance)" which I interpreted to simply mean that the employees correctly got their salaries and at least some of their benefits (they should receive all salary and benefits before investors get anything), which is often (illegally) not the case.
I googled the case you cited, but it doesn't seem to apply to back pay, but instead applies to the proceeds of a winding up being given to laid-off employees as a "bonus" instead of to the shareholders.
In startups, the issue is often complecated, because the same people are often employees, investors, and company officers, and I think the courts have some sense that anyone working for a startup knew it was risky, and treat those people differently from an employee at a big, well-established corporation.
That money is owed to employees by shareholders.
Obviously the trick is to make sure your friends (the employees) get paid first by settling that debt before declaring. I can see how that might be legally troublesome. But it's the vendors, lenders, etc. that should be complaining, not shareholders.
http://www.businesspundit.com/good-work-environment-higher-r...
I don't know if the data is significant, but it's certainly worth nothing.
To clarify: I think it's really a sad state of affairs when the people who commit most of their waking hours to a company and depend on their salary for day-to-day living aren't the ones who are paid first.
Everyone knows: Bros (employees) before 'hos (shareholders).