Skype mess: How far will this go?
gigaom.com
gigaom.com
I think there is also at least one clear lesson. First and foremost, choose who you work with based on their character. I think if you're across the table from Silver Lake, Tony Bates, Brian O’Shaughnessy or (as much as I hate to say it) Andreessen Horowitz, you should build in a significant "character multiple" based on how they acted here. You should also have MOFO or another top legal team on your side. If you're an engineer at any company any of these people are invested in, you should also be reading your contract extremely carefully, perhaps also with legal help. Having options that vest with "no value" is just absurd.
I'll note that I have no stake in this whatsoever, but it just makes me sick. My partner and I sold our company (for a tiny fraction of this deal's value) and spent a significant amount of the deal time negotiating on behalf of our employees after eliminating buyers who we wouldn't want to work for or didn't fully trust to take care of them. I don't want to portray us as saints (we're not, but we both highly value our reputations), but it was the right thing to do and most people I have worked with would do the same.
We're in an amazingly tight market for engineers right now. Please, choose your employer very carefully based on their reputation.
Why is it that we need to exploit people in this game? Especially young engineers or execs with their first VP experiences. Some people get rich, most people are pawns.
As the only software engineer in the startup I've apaprently been identified as a key person in the move. I'd like to think this gives me some leverage, it would take them 3-4 months to find a replacement and get them up to speed. It was my work on early customers and technology demos that helped land the deal, yet I feel like none of that is being recognized.
What would you do if you were me?
Basically if you are working for a startup, (or any company where you are building sweat equity), and your employee number is larger than 2, then you had better have what you think you are getting spelled out specifically in your contract unless you really don't care.
That said, I don't think it's that people are "out to get you" as much as they are usually rather focused during a transition on making sure they themselves are taken care of.
I second the advice to ask for a retention bonus. Cash compensation is the easiest way to ensure that no shenanigans can take place.
Long story short I'm definitely in an "at will" state, my employee # is higher than 2, and while I've received a small amount of restricted stock that will vest immediately upon takeover, it won't be worth much and I believe there will be an earn-out to stretch that value over a way longer period of time. So pretty much nothing of value.
If we do this deal we're all pretty much going to be slotted into the new company with predetermined titles and salary. I've already made my case to the CEO of where I expect to land on both parts, so I'm sure he knows what I'm thinking. I have absolutely no qualms about leaving for another job, so it's his choice to make. We'll see what happens.
I just don't know if there is anything else I should be doing at this point. I could make a lot of noise and make things very uncomfortable, but in the end that will probably only hurt just me.
My thought was to press for a retention employment contract, but perhaps just a retention bonus is the way to go.
In fact, here's a note to founders: if you promise your employees a year's salary in case of acquisition, your people will stay with you. Say you offer that in conjunction with options, you are already a better employer than 99.9% of other founders.
You've already gotten whatever compensation you're going to get for that work. If they think that they'll need more of that going forward, your next deal should reflect that.
> As the only software engineer in the startup I've apaprently been identified as a key person in the move.
Why do you think that you're a key person? Seriously - being the only software engineer isn't enough.
> I'd like to think this gives me some leverage, it would take them 3-4 months to find a replacement and get them up to speed.
If you're really key, the acquirer should be negotiating with you, not them. (I'm assuming that you don't have an employment contract that your current company can sell.)
Think about things from the acquirer's point of view. Your current company doesn't actually know what it will take to keep you around.
And from your point of view, is your current company really going to care what kind of deal you get?
I know I've been identified as a key senior person in the organization from seeing some documentation that is being used in the negotiation. I was also handed a second round of preferred stock right before the talks started. There was no explanation given, but I'm guessing it was meant to temporarily keep me happy.
I realize being the only software engineer isn't enough. It our company was a web-based concern, especially so. (We're in manufacturing). Like I said earlier, I know they can find a replacement but it would steal momentum which is something the acquirer wants.
What I'm most uncertain about is how the transition will take place. I know one day we'll just be told to show up at a new office and ohOneMoreThing here's your new comp package which has been decided for you kthxbye.
I'm pretty certain the acquirer won't be approaching me. To them we look like a turnkey operation. My current company knows what it will take to keep me around because I told them so. Whether or not it's communicated upward is my concern.
Huh? "turnkey operation" does not imply "won't fall apart if the wrong people leave".
> Whether or not it's communicated upward is my concern.
Then you're hosed, going to feel used, ....
You're the only one who cares whether you get what you deserve. If you don't care either, then no one cares.
Note that the sellers want to argue that you aren't essential, because if you are, the acquirer needs to take care of you. Taking care of you increases the cost of the acquisition. (That can put the deal at risk and can reduce their payout.)
No, an earnout clause doesn't change their motivation wrt you much.
Sadly, with the tech media reporting on all the riches being made these days, I expect it happens even more often now. It's so easy for one to be overly trusting and conned while blinded by the huge payout mirage up ahead.
I hope the Skype fiasco at least brings more awareness to the risks.
It's not as if Microsoft is getting a company gutted of people with technical expertise or domain expertise - and the key assets of brand, infrastructure, and technology are not being affected.
Looking at the people who have been reported to be affected by this, it is hard to see any key personnel involved. Yee Lee appears to be just another employee and the executives alluded to were at least in large part, fairly recent hires; and none of them were founders or early employees - any of those who were eligible would almost certainly have cashed out in 2005 when eBay bought the company (and potentially cashed out again when Silverlake purchased from eBay).
[http://news.ycombinator.com/item?id=2693496]
[http://news.ycombinator.com/item?id=2672786]
I would suspect that most employees who stick it out through the acquisition are looking forward to the differences of workplace environment which will come with the transition from a private equity culture to Microsoft's corporate culture.
This story seems to have traction on two fronts, both as a Microsoft bashing peace and as a cautionary startup tale neither of which is accurate: it is unreasonable to imply that they could (let alone should) have made Skype's existing employee stock purchase agreements a point of negotiation. Likewise, Skype is not a startup. It's the Jeep of the digital age - Skype has been little more than an asset within a portfolio since 2005's purchase by eBay.
If Microsoft knew that Skype's agreements exposed them to significant legal liability, which now seems the case, they would have made it a point of negotiation.
Microsoft might have some financial exposure which presumably they have covered - and of course it is not in Silverlake's interest to create poison pills because the relatively small profits are unlikely to balance the financial exposure from a potential Microsoft lawsuit. Not to mention that it is almost certainly in Silverlake's interest to get the deal closed, deliver profits to the LP's, and move on to look for new investments.
I can guarantee that not a single person on my Skype contact list will be aware of this story; and many will probably have forgotten that MSFT are in the process of buying Skype in the first place.
or after the deal - how bad is microsoft
a16z's reputation among top-tier hires is worth
more to them than their gains from
Plus, it's not like it was "do this deal like this, or walk away entirely". What is at risk is either the $100-200mm to fix the options concerns for everyone, or at most, the breakup fee for this deal with Microsoft. Skype probably could find another buyer, even without the Microsoft deal.
Maybe Microsoft overpaid by 2x their nearest competitor. So, a16z only made $200-400mm on this vs. the best alternative (and really, I think it's less than 2x).
The reputation of a top multi-stage fund is worth more than $400mm for sure.
Although you're otherwise probably right.
The only thing going for Google is that it is, after Skype, the only cross-platform voice&video offering existing on the market.
Heck, perhaps this is part of what facebook's recent spate of desktop-engineer-hiring is going after?
And whether or not you agree with that, I think it's clear that's where Google's money is.
[Edit] Given changes in Google's leadership and the apparent emphasis on core function which seems to be underway along with the limited rollout which Google has done for Voice, I would not be surprised if it is destined for the same fate as Google Health over the next few years.
In what way has "Microsoft has already started driving Skype into the ground"?
They don't control the company yet and haven't had a say in any of these decisions?
What specific event are you referring to?
Microsoft should have stayed far, far away.
Facebook seems like the only company that can bring a real network of users to something like this. Google has GMail, but they haven't been able to translate it into any type of social experience at scale.
But their strategy would indicate that they wouldn't implement federation. They would create their own closed system. Facebook is all about growing the value of their social graph, but with very limited interconnection or federation.
I wonder when (or if) it will happen.