[craigkerstiens]

That is a solid outcome, but with nearly 80m (publicly) raised, likely not a giant return based on those numbers and length of company existing. Some may have done quite well, but plenty of unclear details. There are many notable home-runs for all players involved, FB, Whatsapp, etc, but those are often the exception.

This isn't to say it's a bad acquisition or should be dismissed as a failure. It just re-iterates that it's not all easy, glory, and success.

I do hope for the team involved it worked out just as they'd hoped, but from their post it feels like many hard years and more of a next chapter than the end. Best of luck to them all in the future.

[austenallred]

A $220m+ acquisition is absolutely a home run, and likely a win for all involved, even with $80m raised.

FB and WhatsApp are once-in-a-decade type returns. In baseball parlance perhaps a World Series winning grand slam or a perfect game. You needn’t exit for $19B for it to be a great outcome.

[bspn]

For the founders this represents a very nice exit but for investors, not so much. It obviously depends on when they entered, but later stage investors aren't likely to be making much (if anything) off the exit. Getting money back from a struggling investment is always nice, but I doubt the VCs will be touting this as one of their success stories in the quarterly report.

[austenallred]

Later stage is also a different risk profile. They don’t need 100x returns, and their investment is very de-risked compared to early stage. It’s a different game, and returning 2x consistently is solid performance.

[elvinyung]

I mean, don't common stockholders (i.e. all employees) still basically get shafted in a down acquisition?

[amorphid]

Say investors own 60% of the company. In an acquisition worth $220 million, 60% of the company would be worth $132 million. It's common for investors to have a 2x liquidation preference, meaning they get up to twice their money back before anyone other shareholders get $1. $80 million invested means investors get $160 million, more than the $132 million. $60 million would be left over for the founders and employees. There's enough money there to be a life altering amount for many people.

[spullara]

If you see a 2x liquidation preference on a term sheet in this market I would be really surprised. Virtually every term sheet that isn't the one before an IPO or a recap will be non-participating preferred.

[amorphid]

I confess I'm not an M&A/finance/VC-funding wizard. Would you mind giving an example describing the scenario you describe?

[spullara]

Non-participating preferred means that either you are the first to get money off an exit up to the amount of your investment OR you convert to common and get your ownership percentage. For example, say you invested $10m into a company at $30m post and then owned 33%. If the company sold for $20m, you would get $10m and the common would split the remaining $10m. If the company sold for $30m you would get your $10m back either way. If the company sold for $100m, you would convert to common and get $33m.

[tommynicholas]

2x liquidation is not standard anymore - 1x is far more likely. This was an "up" acquisition too so it's possible they exceeded 2x for most if not all investors.

[austenallred]

It’s not a down acquisition...

[tommynicholas]

It's not a down acquisition

[SeoxyS]

If you think a $220M acquisition is a home run for anyone involved, you don't understand the Venture model. Liquidation preferences means that investors are probably getting around 1x their money back, which will be considered a failure in their portfolio. They need a 10-100x win to pay for all of the losses. Common stock holders will be seeing less than their pro-rata allocation of the acquisition price (e.g. if you own 1% of common stock, you are getting less than 2.2M).

The top line acquisition price is probably the full package including costs and retention bonuses, not all of which will be paid out. The only people who will get something for their time are the founders, but they're probably looking at low to mid 8 figures at best.

[austenallred]

If we say 1x preference, there’s still at least 160m left over. Early investors that need a 10x return were investing in 2009, so let’s say 3m valuatiom? They might not get 100x, but they’re going to return way above 10x. The investors putting in in later rounds don’t need to see 100x returns, as their investment is more derisked, and series C+ is a very different game.

[JonFish85]

If "the number" is, say $220m, it could be a number of things. If it's cash today, others have done the math on how things could get divvied up.

The "top line" number can mean a lot of things though; it almost certainly includes the assumption of hitting several targets, some of which are reasonable and some are probably stretches. It's also a very real possibility that the "real" cost that Chase paid was just the right amount to make the common stock evaporate; investors get their money back such that $0 is split amongst common stock. Employees then are given a sheet to sign saying that their stock in WePay is now worth $0, but here's an offer for Chase stock vesting over 4 years.

Anecdata, for sure, but most of the deals I've seen have been something like this. The top-line number is all well & good, but the real dollars people extract from it are invariably less (again, just in the limited set of things I've seen). I'm sure there are exceptions (I bet the Instagram folks did just fine). But if I had to make a guess, it'd be that the founders will come out with a good chunk of cash, and employees will get a job at Chase out of it (with the valued employees getting a nice bonus at the "new car money" level)

[bogomipz]

>"It's also a very real possibility that the "real" cost that Chase paid was just the right amount to make the common stock evaporate; investors get their money back such that $0 is split amongst common stock."

Would you mind elaborating on this? What causes the common stock to "evaporate" exactly? Is this a side effect or is this intentional?

>"Employees then are given a sheet to sign saying that their stock in WePay is now worth $0, but here's an offer for Chase stock vesting over 4 years."

For an the average rank and file employee who has been grinding it out at Wepay through the ups and downs I am imagining this might not be a "feel good" moment.

[JonFish85]

> "What causes the common stock to "evaporate" exactly? Is this a side effect or is this intentional?"

This would mean something like paying exactly what the valuation at the last round was, such that it'd cause the cap table to unwind leaving precisely $0 to split amongst common stock. It's not a huge win for investors, but if it's clearly not going to be a huge win, they get their money back (plus whatever conditions they had for more), and can move on.

> "For an the average rank and file employee who has been grinding it out at Wepay through the ups and downs I am imagining this might not be a "feel good" moment."

Probably not. I've had friends who have been at companies that have sold at these "big numbers", but come to the sad realization that the numbers aren't "real" (e.g. their 1.5% stake of $250m is worth $0). I'm sure it's a weird feeling to see the "congrats!" messages! However, the "retention bonus" of $100k over 4 years on top of their salary is usually enough to keep people from burning the place down (being facetious).

[bogomipz]

Thanks for the clarification. I do feel for the employees that are realizing their equity they took in lieu of cash is worthless.

The retention bonus is nice provided you don't mind working for a Goliath bank I guess.

[0xbear]

That’s what people don’t get. It’s only really a decent outcome for the investors and the founders, and then only until you consider how long it took to get there. Front line grunt gets bupkis, and now has to find another job, because fuck working for a bank.

[hkmurakami]

I mean, there are many reasons to work for a startup but pay is not one of them. If you want the payout, work for one of the majors.

[0xbear]

That’s not what the founders will tell you. Even for employee #1 in 999 cases out of a 1000 it’s not really worth it, if the goal is to get ahead financially.