Category Archives: Tech Valuation Bubble

How Blackberry Screwed Good Technology’s Employees

This came up in a meeting a couple days ago. Good Technology was valued at $1.1B. Blackberry bought it at huge discount from it’s value and the employees got screwed:

Around 9 a.m., hundreds of employees filed into a conference room or started up videoconference software to watch Good’s chief executive, Christy Wyatt, discuss the sale. Ms. Wyatt introduced BlackBerry’s chief, John S. Chen, who winkingly apologized for how his deal makers had driven Good’s final sale price down to $425 million, less than half of the company’s $1.1 billion private valuation.

In an investor document about the sale that was distributed to shareholders, employees discovered their Good stock was valued at 44 cents a share, down from $4.32 a year earlier. In contrast, preferred stock owned by Good’s venture capitalists was worth almost seven times as much, more than $3 a share. The paperwork also showed that Good’s board had turned down an $825 million cash offer just six months earlier, in March.

… and the preferred stock of the investors …

In Good’s case, the six investors on the board had preferred shares worth a combined $125 million. After the sale to BlackBerry, Ms. Wyatt, who has since left the company, took home $4 million, as well as a $1.9 million severance payment, according to investor documents. In contrast, startup employees generally own common stock, whose payout comes only after those who hold preferred shares get their money. In Good’s case, the board’s preferred stock was worth almost the same as all 227 million common shares outstanding.

… and some had paid taxes already …

For some employees, it meant that their shares were practically worthless. Even worse, they had paid taxes on the stock based on the higher value.

New York Times: ‘When a Unicorn Start-Up Stumbles, Its Employees Get Hurt’

The New Yorker Drops a Bomb on Twitter

Joshua Topolsky in The New Yorker:

Ultimately, Twitter’s service is so confused and undifferentiated in the market that it’s increasingly difficult to make a clear case for its existence. There are a small handful of features Facebook might add, or a separate app that it could easily create (as it did with Messenger and the photo-sharing stand-alone feature Moments) that would provide a similar but more consistent experience, with vastly more reach than anything the company can provide today (or tomorrow, for that matter). This is especially notable to all of us in the world of media, the people who fill these services with highly valuable and hotly traded “content,” such as the piece you’re currently reading. Social media is a scale game or a product game, and Twitter is failing at both.

 

The End of Twitter

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Unicorns vs Donkeys: Let’s Do the Math

Abhas Gupta writes about the impotance of the ratio of lifetime customer value to cost of customer acquisition – and what it means for startups on Medium:

Like Newton’s laws of gravity or momentum, most tech startups (see exceptions below*) who sell directly to their customers — both enterprises and consumers — must eventually obey the Fundamental Law of Growth: LTV/CAC > 3. There’s a lot of nuance as to why — a discussion that is better suited for a semester-long class than a blog post — but suffice to say that the LTV/CAC ratio speaks to a startup’s revenue trajectory, capital needs, and in turn, how much “irrational exuberance” is demanded of its investors. The lower the LTV/CAC ratio, the less efficient a company is at deploying capital and the more money it needs to fuel growth; conversely, the higher the LTV/CAC ratio, the more efficient the company is and thus the more value it creates for the same amount of capital. Though this can be derived, many before me have empirically observed that 3x is roughly the threshold needed to build big, sustainable businesses.

Read Gupta’s apply this analysis to startups like HelloFresh, Evernote, Oscar, and ZocDoc: Unicorns vs. Donkeys: Your Handy Guide to Distinguishing Who’s Who

Featured image from Flickr user Cathering/rumpleteaser.