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Comment by PragmaticPulp | Hacker News Reader

> I like the idea that a startup that fails to be a unicorn can still be something.

The problem isn’t that the company failed to be a unicorn. The problem is that the company was declared to be worthless and was given away to the founder (but not employees who built it), but it obviously wasn’t worthless as it’s currently valued at $100 million. Early employee equity was wiped out in the process.

The point is that you can work for a $100mm company, build the foundation of a $100mm company, yet walk away with nothing because the investors and founders can play games with your equity. Unlikely to happen again given how this played out. However it must hurt to be an early Gumroad employee doing the math on what their equity would have been worth today after being told the company was worthless.

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The alternative was to close down the company completely, I'm not sure how that would help the employees equity.

Besides, options are by nature expiratory unless certain milestones are reached, which obviously wasn't the case. And if the employees did have real equity there is no way the founder could have gotten that without their consent.

> The alternative was to close down the company completely

No, the alternative was to give the IP and equity ownership proportionally to the employees, not 100% to the founder.

Instead, they gave it all to the founder and none to the employees who built the IP (as far as I can tell from public documents).

Employees were told they received nothing because their work was useless. Apparently it wasn’t so useless.

I'm a little confused about how this works in a sort of mechanical function.

At the time it was deemed worthless or whatever term we want to call it, the owners were the initial investors. They sold it (well some of them) back to the initial founder.

It's their ownership to sell....

I go back to my point that we need to be honest about what the equity and rights of individual contributors really IS more than some ephemeral expectation that someone should get equity ... after most everyone has given up... or after others work to resurrect it.

Dropping the price to exercise the options to zero dollars seems like it would be an equitable solution. If the company is really worth nothing then why should an option to buy a share of the company cost more than that?

>If the company is really worth nothing

I'm not sure I understand why that would be or why that would even come up if you were investing in 'worth nothing'.

Do we know for a fact that the investors sold the equity back to the founder and not the company (like a stock buyback)? The investors just wanted to get out, so tracking down former employees, deciding how much equity each one deserves, and selling them equity probably isn't what they want to spend time doing. So the only real options would be selling to the company, or to the founder.

> but it obviously wasn’t worthless

I disagree, there's nothing obvious about it. On the contrary, I argue that it WAS worthless (in the same vein that "ideas are worthless" - not that they lack anything of value, but that without sustained effort & dedication to extract said value, they're really not worth much).

Also, it's entirely possible that the value of the company was actually _negative_ for the investors. Happens with other stuff too - sometimes you throw out junk that others recondition & sell for large sums of money. Were you tricked by those who resold your junk?

> On the contrary, I argue that it WAS worthless

The founder continued running the company with part time contractors and blogged about their profitability. It wasn’t worthless.

The founder might've earned more at a FAANG or different companies, just like the other early employees presumably did. He didn't contact the investors to buy them out for $1 - the investors did, because the tax cut was worth more to them by that point.

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