I’m afraid behavior like this will only get more common and really shines a light on what a bad deal startups are for anyone but VCs and founders. Windsurf founders should be ashamed of themselves, but of course won’t be.
Financially speaking, is it even worth joining a startup anymore? Compared to just going to any of the big companies. The latter will likely pay you more, with less risk involved.
Seems like the best shot is to strive toward becoming financially independent, and then just go for the startup route and follow your passion. If you it doesn't work out, no big deal - if things turn out great, you'll just be even better off.
I am of the firm belief the solopreneurship is the future, especially with the power of AI. I don't believe corporations of any type, from startup to tech giant have the interests of anyone but the majority shareholders in mind. Employees, customers, partners, all get the shaft. When money is involved, startups aren't product companies, they're financial instruments.
I must be misunderstanding what he is saying, but I can't figure out what. Once his shares have vested, they are his. What entity forced him to sell his shares for 1% of what they are worth and how could they possibly do that?
It's not entirely clear, but I think Google/DeepMind offered him 1% of (what he thought) the shares were worth and then he refused and then the shares became worth almost nothing because Windsurf was just a husk of its former self.
why would anyone work in startups as early devs anymore. Tell me what is the upside? There seems to be only downsides.
Startup Fails , you loose - Gets acquired - you loose
What is the motivation to perform .
faang has sucked the oxygen in the air. For experienced engineers, the one upside to startups is if you are a founder and you are creating a change you want to see in the world. But this delusion is shattered as time goes by and you realize that you are only a cog in a smaller wheel, whereas, in bigtech you are a cog in a bigger one.
On average, startups tend to have a better culture due to the incentives at play compared to big-tech. And that attracts engineers regardless of the comp.
This is one of the most confusing things I've ever read.
Cognition acquired Windsurf. So how has he "joined Cognition"?
"I had a place at Google DeepMind as part of the deal." What does that mean? DeepMind doesn't have anything to do with Cognition or Windsurf, right?
Why would an offer at Google require forfeiting vested shares in Windsurf? Is that Windsurf policy or Cognition policy or Google policy?
"I was ultimately given a payout of only 1% of what my shares would have been worth at the time of the deal." So he took the payout and forfeited the shares? "In going to Cognition, I’ve chosen a different direction." Or not, he rejected the payout and kept the shares? I can't even tell what's hypothetical versus what actually happened.
I literally don't understand a single thing about this tweet. I've read all the comments here so far and my confusion seems to be shared. Can anyone who has context please help explain what's actually going on? And particularly how any company could force you to forfeit vested shares in a company?
This is a fair cautionary tale but it's worth understanding the specifics of the situation – Windsurf maintained a relatively easy to replicate product with no moat, and employed a bunch of attractive talent. The company got gutted of these employees and lost its valuation because no suitable buyer thought their IP was exceptionally valuable on its own. Just because this was the outcome for Windsurf does not mean there are no longer opportunities to join startups building sticky customer bases with valuable IP and walk away wealthier when they exit – yes there is a liquidity problem[1] but let'a be honest with ourselves about the specifics of the case for Windsurf.
I don’t understand why the specifics of the situation matters here. We know the company got acquihired for $2.4B, the problem is, why did all of it go to investors and founders and nothing for employees?
I’m not sure customer churn rate has any impact on liquidation preference.
The headline "startup bought for x million" is almost always a lie, either direct or by omission.
First, when a startup is bought, its generally not bought at the headline rate. So if you see a "bought for $45m" that doesn't mean People who own shares all got a % of 45m.
That number is normally bullshit, but also a "total package" which include share offers for joining the new company.
This means you will get say 1% of the headline buyout now, and then golden handcuffs to get the rest.
Also, it makes no sense to give employees that much money upfront. After all, if I'd been given $1m in one go, I wouldn't be fucking working now.
I am surprised that the employment agreements between execs/founders and Windsurf didn't address this. A cautious investor--or even a cautious key employee joining the team--would have locked the founders and key employees down to prevent them from being hired away without some recourse. This is especially important when all of the value was in the employees. There should be lawsuits forthcoming...
I'm waking up personally to the unethical side of Software development as well. You can either do little and get paid pocket change or you can provide a ton of value for pocket change next to some promises lulling you in, where the value of your work exponentially increases, but you will see nothing of it and whatever you do: you are still a replaceable cell in excel to them and there will be ways where you get dragged over the table. If the money isn't directly in your bank account, it might as well not exist or was a lie.
Sooner or later you are the horse behind the barn anyway.
As an engineer if you are gonna be a rank and file employee you need to do it for your own reasons. I think the main good reasons to do it are:
1. It's relatively chill and you value the stability. You deliver competence from 9-5 then go home to your family or some other thing that's more important to you than work.
2. You really enjoy the pure engineering side and find meaning in the technical artifact you're creating. Probably it's open source and has some value/community outside of your employer.
3. You're gaining valuable experience that you can later leverage into something else. Probably you're in the first 5 years of your career.
If the main thing driving you is growing a business, and you don't directly own (not options or RSUs or whatever, actual real equity) a significant slice of it, you are very likely misdirecting your energy.
(I guess there are also cases where the mission of your organisation is not profit and you care about that. I don't know any engineers in this position but I might be quite happy working in the public sector).
I still feel the need to bring clarity by pointing out the obvious in the most direct unfiltered manner, as you can see other commenters in this thread trying to frame it differently with an absurd of confidence while doing so.
Engineers: always negotiate for higher base salaries. In the vast majority of cases—especially during acquihires—your equity will be worth little or nothing. Founders and VCs still get paid; employees rarely do.
Don't just accept promises. Ask for the 409A valuation, liquidation preferences, and pay bands. If a company won’t provide transparency, that’s your signal.
Equity is a lottery ticket. Salary is money in the bank.
I had some RSUs from a previous company (likely will not be worth anything) and some options at another, but I have no idea how to understand how dilution like this works. My understanding is surface level of that scene in The Social Network.
I feel like I understand _what_ an RSU is and what options are, but are there any good resources for me to learn from?
Working at a startup pretty much always involves trading off money in the bank for other things. That’s the industry’s whole deal. Which is why I stay in Big Tech with liquid RSUs.
I would like to understand a bit here about what you are saying as having been involved in a few startups and I do not quite understand what you are getting at. My understanding based on experience (successful exits, small exits and crash and burns) follow.
First a 409A is generally engineered to keep the lowest value possible in order to allow the employees to exercise their options at the lowest value via an 83b election so at an exit they can be taxed at the long term capital gains rate. When someone joins a startup and is issued options the value of the stock is set via the 409A (which has to be renewed every year). The lower the number the more likely an employee can afford to write the check. 100K shares at $0.01 vs at $0.25 is a major factor for anyone to consider. Any startup worth their damn will make sure the facts in any 409A fit a low number for that reason. The reality of an exit where you are acquired will be based on other numbers that optimize for forward earns and value of your team and tech.
The questions you need to ask are:
What is the total authorized shares?
What is the required process to raise that number?
How are we funded?
Does funding include preferred shares?
What is the preference on those shares?
On an exit what is the payment order?
I agree about the salary bands and at my current company we provide them, as well as answering all the questions above upfront to any candidate with an offer.
The reality of windsurf is that the founders are scum and this is going to end up in court for years. Google should be ashamed.
When people give you a percentage (1%), that is a ratio and they are not telling you either number. So, that makes me a little suspicious. I wonder how much he got in the end?
My base salary was fine but the magic was in the stock.
I got a payout on acquisition by a FAANG+ (as first employee). It was only 300K but I put 50K of that into Nvidia. Actually I invested all my payout from my startup stock into tech stocks. And I got a terrific golden handcuffs deal.
What I find amusing is that YC’s Garry Tan is going around explaining to Prem how he actually got a good deal and that the Windsurf founders were very generous to their early employees. Meanwhile from his perspective he joins a company with friends he’s known for years, takes on basically the same risk that the founders did, probably gets some fraction of the equity they did for that work (10%? Less?) and then when payoff time comes he gets cheated out of that too.
If I was a venture capitalist dependent on 20-somethings believing in the dream I sold them maybe I wouldn’t write snarky replies on them on Twitter when this happens and actually look into fixing things for early employees (like, maybe, giving them similar terms that the founders get), but that’s just me I guess.
I went through an acquisition very early in my career, and for the longest time I believed it was the best outcome for everyone. Over time, I realized that my naive belief was purely due to the founders going way above and beyond to make sure each and every employee (including folks doing just data entry) got a good outcome (accelerated vesting, significant equity in new company, top of the band pay, etc.). It made me realize that if you ever want to work at a start up, bet on the founder, rather the company. Even with mediocre outcomes, you'll end up ahead in the long run compared to folks who're just looking out for themselves.
A lot of bias against startups in the comments. These are missing (1) how terrible the working conditions in bigco have become in the meantime (2) truly good startups (they exist) that pay solid base salaries
This was just a preference cliff, plain+simple. Windsurf got paid maybe $3B for itself. But the investors and senior management got their cut first. How? Well, the preferences they negotiated.
No one really knows how the game is played
The art of the trade
How the sausage gets made
We just assume that it happens
But no one else is in the room where it happens
#2 wasn't in the room when it happened. In a very real sense, he's lucky he got anything. Management owes a fiduciary duty to the shareholders and #2 is a shareholder. But negotiating the $3B covers that duty.
86 comments
[ 4.9 ms ] story [ 102 ms ] thread> I was given an offer that would explode same day. I had to forfeit all of my vested shares earned over my 3.5+ years at Windsurf.
Seems like the best shot is to strive toward becoming financially independent, and then just go for the startup route and follow your passion. If you it doesn't work out, no big deal - if things turn out great, you'll just be even better off.
You're assuming someone joins a startup when they could join a big company. It's an exceptional occurrence.
Presumably you have a lot more control and freedom to do things how you want than at a large company with a lot of red tape etc.
That's the main reason I would do it.
On average, startups tend to have a better culture due to the incentives at play compared to big-tech. And that attracts engineers regardless of the comp.
Cognition acquired Windsurf. So how has he "joined Cognition"?
"I had a place at Google DeepMind as part of the deal." What does that mean? DeepMind doesn't have anything to do with Cognition or Windsurf, right?
Why would an offer at Google require forfeiting vested shares in Windsurf? Is that Windsurf policy or Cognition policy or Google policy?
"I was ultimately given a payout of only 1% of what my shares would have been worth at the time of the deal." So he took the payout and forfeited the shares? "In going to Cognition, I’ve chosen a different direction." Or not, he rejected the payout and kept the shares? I can't even tell what's hypothetical versus what actually happened.
I literally don't understand a single thing about this tweet. I've read all the comments here so far and my confusion seems to be shared. Can anyone who has context please help explain what's actually going on? And particularly how any company could force you to forfeit vested shares in a company?
https://x.com/apartovi/status/1948444826674102732
bad look all around.
[1] https://techcrunch.com/2024/01/11/us-startups-have-a-liquidi...
I’m not sure customer churn rate has any impact on liquidation preference.
The headline "startup bought for x million" is almost always a lie, either direct or by omission.
First, when a startup is bought, its generally not bought at the headline rate. So if you see a "bought for $45m" that doesn't mean People who own shares all got a % of 45m.
That number is normally bullshit, but also a "total package" which include share offers for joining the new company.
This means you will get say 1% of the headline buyout now, and then golden handcuffs to get the rest.
Also, it makes no sense to give employees that much money upfront. After all, if I'd been given $1m in one go, I wouldn't be fucking working now.
1. It's relatively chill and you value the stability. You deliver competence from 9-5 then go home to your family or some other thing that's more important to you than work.
2. You really enjoy the pure engineering side and find meaning in the technical artifact you're creating. Probably it's open source and has some value/community outside of your employer.
3. You're gaining valuable experience that you can later leverage into something else. Probably you're in the first 5 years of your career.
If the main thing driving you is growing a business, and you don't directly own (not options or RSUs or whatever, actual real equity) a significant slice of it, you are very likely misdirecting your energy.
(I guess there are also cases where the mission of your organisation is not profit and you care about that. I don't know any engineers in this position but I might be quite happy working in the public sector).
Don't just accept promises. Ask for the 409A valuation, liquidation preferences, and pay bands. If a company won’t provide transparency, that’s your signal.
Equity is a lottery ticket. Salary is money in the bank.
I feel like I understand _what_ an RSU is and what options are, but are there any good resources for me to learn from?
Stock options were always a lottery. But this takes the shenanigans to a whole new level.
First a 409A is generally engineered to keep the lowest value possible in order to allow the employees to exercise their options at the lowest value via an 83b election so at an exit they can be taxed at the long term capital gains rate. When someone joins a startup and is issued options the value of the stock is set via the 409A (which has to be renewed every year). The lower the number the more likely an employee can afford to write the check. 100K shares at $0.01 vs at $0.25 is a major factor for anyone to consider. Any startup worth their damn will make sure the facts in any 409A fit a low number for that reason. The reality of an exit where you are acquired will be based on other numbers that optimize for forward earns and value of your team and tech.
The questions you need to ask are:
What is the total authorized shares? What is the required process to raise that number? How are we funded? Does funding include preferred shares? What is the preference on those shares? On an exit what is the payment order?
I agree about the salary bands and at my current company we provide them, as well as answering all the questions above upfront to any candidate with an offer.
The reality of windsurf is that the founders are scum and this is going to end up in court for years. Google should be ashamed.
I got a payout on acquisition by a FAANG+ (as first employee). It was only 300K but I put 50K of that into Nvidia. Actually I invested all my payout from my startup stock into tech stocks. And I got a terrific golden handcuffs deal.
After that I could afford to retire and I did.
If I was a venture capitalist dependent on 20-somethings believing in the dream I sold them maybe I wouldn’t write snarky replies on them on Twitter when this happens and actually look into fixing things for early employees (like, maybe, giving them similar terms that the founders get), but that’s just me I guess.
Smells like a strong bias against employees in favor of management and founders.