When unicorns bleed, employees feel the pain

Working at one of the “unicorns” — those 100+ private tech firms valued over $1 billion — is not always the road to riches.

It turns comes with some serious risks.

Katie Benner’s New York Times article about Good Technology, a mobile security firm in Sunnyvale, should serve as a cautionary tale for anyone thinking of joining a fast-growing startup. Good, which was founded in 1996 — does it still count as a “startup?” — had been valued at $1.1 billion. The company turned down an offer of $825 million in March from CA Technologies, because Good’s leaders thought they had a shot at a bigger IPO, the article states.

But a series of problems emerged shortly after turning down the $825 million bid — other firms had weak IPOs and a publicly traded rival’s shares dropped. The company’s growth plans were not working, and so on.

In September, Good sold itself to BlackBerry for $425 million. Investors with “preferred stock” have a guaranteed payout.

But for employees who tend to hold common stock and who get paid after the preferred stock payout, the BlackBerry sale erased much of the the value of the stock they held.

In some cases, they had paid taxes on the shares’ value when the paper value of the company was valued as an unicorn, with “one person’s tax bill came to more than $80,000, while another paid more than $150,000,” the story said.

Said one employee:

We listened to these executives and, in the end, incurred huge tax bills because we trusted them. Employees essentially ended up paying to work for the company.

StartupLJackson, an anonymous blogger who writes about startups and Silicon Valley, wrote that if an employee wants to get risk, better to join a profitable public firm, such as Google:

As far as I know, startups are the only way to get 20 years of experience in five. The reason to join a startup is because you are awesome, you’re willing to work hard, and you don’t want to wait 20 years to be making decisions that impact the business.

And from Khosla Ventures partner Keith Rabois, advice for startup employees:

Above: Bob Andres/Atlanta Journal-Constitution, MCT Archives

 

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  • Tony Wasserman

    This story makes Christy Wyatt a strong candidate to join the Fiorina Society of Failed CEOs. Note that she didn’t exactly walk away empty-handed either.

 
 
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