[compsciphd]

down round sale doesn't mean purchase price is less than invested.

i.e. company brought in a total of 30-40 million in investment at a 300 million valuation. sells for 200 million. they still sold for a lot more than invested.

also, for people still at the company, my observation from friends who were in that situation is that if they are buying the company for the talent, they get good retention offers.

In this case, yes, it could be that they are wiped out, but the employees got a salary and the investors will lose money overall. so the employees come out ahead of the investors.

[hn_throwaway_99]

In this case, they got over $300 million in total funding, not just valuation, so your point doesn't apply here.

> In this case, yes, it could be that they are wiped out, but the employees got a salary and the investors will lose money overall. so the employees come out ahead of the investors.

Except, and this is what a lot of startup employees don't really grasp, is that a VC is always widely diversified while an employee can't be. At any given time a VC will have lots of investments, and they should expect most of these to be relative losers. Employees, however, can only work for one company at a time, and for startups they usually take significantly under market rate given that they're taking a chance on their equity.

[compsciphd]

One should never work for a startup for the equity.

The equity is a "bonus/lottery ticket" for the future.

IMO, You work for a startup because you get to work on exactly what you want to work on in a way that would be more difficult in a larger company (in terms of technology, the amount of effect you can have, the learning experience....) and the salary is sufficient for your goals and needs (i.e. support yourself in a lifestyle that you are content with and able to put sufficient savings away for the future so that you will be able to afford the things you want/need in that future).

If the salary isn't sufficient, you shouldn't work for a startup banking on the equity, as you can't bank on it.

If the experience of what you will be working on isn't special and you could work for a larger firm that pays more, you should work for them, not the startup, as you aren't getting any extra value to make up for the lower pay from the startup.

At the end of the day, a startup that goes to 0, the investors lost all their money, but all the employees got a salary for the time being there + whatever growth/value they personally got of the work that they can take to their next job. If the startup doesn't go to 0, but goes to under invested dollars value, it is effectively the same thing, the equity employees were issued is 0 and the investors have lost money, while the employees at least are net positive on their salary.

I really think people who say to work for a startup to take less salary because of the lottery ticket that is equity are making the wrong decisions. I'm saying that as someone who is now on his 3rd non public company, where the first job didn't work out for me (and the company was then sold at a down round, though more money than they had raised), the second company ran out of money and was "aquihired" by a larger firm and "Hopefully" this third company will go public (though current market trends make that a hazy crystal ball for the foreseeable future). But none of these jobs I took because of the equity, I took them because the salary was sufficient for my goals/needs and I got to work on things I really wanted to work on in a manner to have an impact that I couldn't have elsewhere.

[MCArth]

article says fungible raised $300 million (_not_ at a $300 million valuation)

[compsciphd]

yes, I was responding to the concept of a down round in general and explicitly noted that in this case, the company was worth less than what the people invested.