I’m more curious how angel investors are being treated in these exits. If _they_ dry up the whole pipeline goes away
Non-essential employees and small investors without the incentive or pockets to fund a legal fight get offered as little as possible. This structure also provides lots of flexibility to the 'not acquirer' when it comes to paying off existing debts, leases, contracts, etc. Basically, this is the end of being an early employee or small angel investor potentially resulting in a lucrative payoff. You have to remain central and 'key' all the way through the 'not acquisition'. I expect smaller early stage investors will start demanding special terms to guarantee a certain level of payout in a 'not acquisition'. I also expect this to create some very unfortunate situations because an asset sale (as they used to be done), could be a useful and appropriate mechanism to preserve the products and some jobs of a failing (but not yet fully failed) company - which was better for customers and some employees than a complete smoking crater.
So the only ones getting shafted are the employees.
Yes, correct
During boom times it made more financial sense to go straight to a FAANG if you could.
Boy, it would be so nice if a major correction were to drain these massive companies' warchests so that it doesn't become more common.
Let's face it and accept that the golden days of people working in tech startup (and soon large companies) are over.
RIP 1980 - 2023.
I guess you'll have to face the music at some point.
https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?location...
/s
If you exercise your options you have real stock in the company, so I don't see how you can get shafted here.
Did investors do some sort of dividend cash out before employees were able to exercise their options? (Obviously shady, but more about investors/leadership being unethical than the deal structure).
Would love to know more about how this played out.
But these new “acquisitions” aren’t even that. They are not acquisitions at all. They just hire the talent directly with perhaps an ip rights agreement thrown in as a fig leaf.
The fact that these are not really acquisitions doesn't change the fact that Groq the entity now has $20b.
The employees of that bought company were given an incentive by the buying company to stay for a while and help tearing down and integrating their product into the buying company.
One could say shady, I'd say that it was just a bad deal.
It's definitely true that common stock gets $0 if the acquisition price is <= (sum raised + debt).
That sort of sounds like the startup wasn't doing well, and the acquisition wasn't for a lot of money (relative to amount raised), which seems very different from these Groq/Windsurf situations.
In the deal mentioned above: my guess is that preferred class shareholders and common shares got paid out but the common shareholders had such a low payout that it rounded down to zero for most employees.
This can happen even in a regular acquisition because of the equity capital stack of who gets paid first. Investors typically require a 1x liquidation preference (they get their investment back first no matter what).
The deals are all weird so it's hard to really know what's happening, but if Groq gets $20b, I don't see how common stock holders don't get paid.
I've seen some discussion that paying out normal employees might look more like an acquisition on paper which they may want to avoid for ftc reasons. I've also seen some discussion that this is a quid pro quo to the trump family to get Nvidia back into China (jr. bought in at the September financing round..).
Lots of speculation in general, including why nvda chose to spend 20bil on this.
Dividends to only one class seems crazy. I would be kind of shocked if that was legal.
She didn't see a dime out of it, and was let off (together with a big chunk of people) within 6 months.