Very difficult to answer this with specificity, but in general there are a number of factors that influence the amount of cash you ultimately net from a sale, including:
- Cap table: what % is owed to other founders, investors, employees, etc?
- The total acquisition price may include substantial legal and other fees that will lower the actual amount received by the owners or shareholders.
- How much of the acquisition is financed through cash vs. equity? Equity may vest over a certain time period, and be subject to certain requirements (your sustained performance, ability to clear legal scrutiny, etc.).
- Taxes.
Taking all of this (and probably more) into consideration, it doesn't seem unreasonable for a founder to ultimately net <10% of the total sale price. Again, this is all wild speculation in this particular case.
His company existed for a seven months in 2016 before being bought by Uber. It isn't clear (to me) if there were third party investors or what the cap table was, broadly. Purportedly 90 employees at time of sale to Uber.
his contract to sell w uber had a significant earn out, the 680m was based on hitting different tech milestones. He hit none of them before he was fired.
Why would you ever “sell” a company under such conditions? “We pay you $1T if you write a simple loop in the next two days.” Next day when you come to work: “Fired LOL. Do not cross Start, do not collect $1T.”
While this is a crazy example, I have been in very similar kind of position (not $1T for a loop, though) and been worried about the strong motivation to get rid of me on certain N+364 day timelines. It didn't happen and I was treated quite honorably. I think if you want your acquisitions to go well, you don't do cheesy stuff like firing people to save money (when the integration is otherwise going quite well) or else your future acquisitions will be harder. People talk.
Usually you don't agree to contracts that let you be fired for the sorts of things that don't end up with you in court. Buyers, being reasonable, refuse to sign contracts where they can't fire you for being a criminal.
The difference between a court and a contract like that is that the court is impartial and has a clear bar of criminality ("innocent until proven guilty" to some standard of proof), whereas it's always in the company's interest to fire you at a mere accusation of a potential crime (or non-criminal wrongdoing)...
Which is why, when you're selling a company for hundreds of millions of dollars in unvested stock, you don't sign a deal where the buyer can fire you for "mere accusations of a potential crime". Uber lost the lawsuit with Google and had to pay a quarter of a billion dollars. I'm sure their contract said something like "if you have materially misrepresented information to us that results in us getting sued for a quarter of a billion dollars, we can fire you".
Because that's a trick that only works once for the buyer so you know they're not going to pull it. It may not even work that one time because you'll tie them up in court.
I don't know what the CGT situation is in America, but in Australia of you own an asset (shares, property, etc) for less than 12 months before sale, capital gains tax kicks up to about 50%.
If you own things and sell them for a capital loss you get a tax credit to use later.
If you sell for a capital gain within 12 months then you will pay tax on the full amount of profit from the sale. For individuals this is just added to your income tax.
If you sell for a capital gain having held the asset for over 12 months you get a 50% discount to how much profit is taxed.
The tax credit for a capital loss can be used to offset a capital gain but it gets applied before any discount is applied.
I am not an accountant but I have listened to one.
That sounds essentially similar to the US system except that the US long-term capital gains tax rates are not exactly 50% of income rates. They're 0% of income rates on the low end, approximately 53-68% in most of the middle tax brackets, and 64% at the high end.
Typically you have to hold assets for a year for them to be taxed as capital gains. Otherwise it's just normal income, which caps out at 37%. Capital gains maximum rate is 20%.
Pedantically, the max cap gains rate is 23.8% with NIIT. (Also, these are the federal tax brackets; states can and mostly do impose additional taxes on both income and capital gains.)
CGT operates by treating net capital gains as taxable income in the tax year in which an asset is sold or otherwise disposed of. If an asset is held for at least 1 year then any gain is first discounted by 50% for individual taxpayers, or by 33.3% for superannuation funds. Capital losses can be offset against capital gains. Net capital losses in a tax year cannot be offset against normal income, but may be carried forward indefinitely.
For most CGT events, your capital gain is the difference between your capital proceeds and the cost base of your CGT asset. (The cost base of a CGT asset is largely what you paid for it, together with some other costs associated with acquiring, holding and disposing of it.)
There are three methods for working out your capital gain. You can choose the method that gives you the best result – that is, the smallest capital gain.
CGT discount method
Eligibility: For assets held for 12 months or more before the relevant CGT event.
Not available to companies.
For foreign resident individuals, the 50% discount is removed or reduced on capital gains made after 8 May 2012.
Description: Allows you to reduce your capital gain by
50% for resident individuals (including partners in partnerships) and trusts
33.33% for complying super funds and eligible life insurance companies.
How to do it: Subtract the cost base from the capital proceeds, deduct any capital losses, then reduce by the relevant discount percentage.
See: The discount method.
Indexation method
Eligibility – For assets
acquired before 11.45am (by legal time in the ACT) on 21 September 1999
held for 12 months or more before the relevant CGT event.
Description: Allows you to increase the cost base by applying an indexation factor based on the consumer price index (CPI) up to September 1999.
How to do it: Apply the relevant indexation factor, then subtract the indexed cost base from the capital proceeds.
See: The indexation method.
Other method
Eligibility: For assets held for less than 12 months before the relevant CGT event.
Description: Basic method of subtracting the cost base from the capital proceeds.
How to do it: Subtract the cost base (or the amount specified by the relevant CGT event) from the capital proceeds.
See: The 'other' method.
In some sense, this is exactly what decompression does. The question, if I understand you correctly, becomes one of "how is this decompression program designed?" Does it require any particular inputs? etc.
Although somewhat different than what you're describing, you might be interested in arithmetic coding, which encodes data to a single numerical value that can later be recovered by an inverse process.
It's cock. Took a course with Andrew Appel; the heroic man did not flinch once when he said it over and over again during the semester. My favorite line of the course: "You're going to do your homework in COCK."
Reasonable people might disagree, but I think that what they say there doesn't answer the question at all. Cock means rooster in English too, after all, but somehow the name doesn't get used.
Immunity Project and BlockScore are my favorites. Both appear to be solving real problems at the right level of scope (rather than providing feature support for a niche, for ex.).
What you've pointed out is what people do, but not what they are theoretically allowed to do :)
Transporting a MacBook, Xbox, PS4, etc. from the United States back to a South East Asian country (as you suggest), is illegal. For the casual traveler there probably isn't a great risk, since they can always claim it was an accident. But for the recurrent backpacker, the risks are potentially higher.
This is really interesting -- I had the exact same reaction as the majority of the responses to this comment.
Ignoring the tax issue for a moment, I would expect the arbitrage to fluctuate with shipping costs and currency valuations, which is really interesting.
But unfortunately, it's really difficult to ignore the tax issue. In particular, China and the United States are sticklers for this, and getting caught smuggling a high priced item (I forget the threshold) won't be viewed as innocent arbitrage by customs.
This model would work equally well for drugs and human trafficking, so I would assume that most governments will/should have a problem with this form of tariff evasion.
Note: I'm not trying to imply that the founders have anything but the best intentions here. I'm simply pointing out that the very existence of a viable distribution network such as this might be of concern for authorities.
Basic rule of thumb: If your startup's profit model is based off completely screwing over the governments around the world, then even in the ever so small chance it's not illegal everywhere yet, it will be very soon.
One more important item that isn't listed in the article:
Step 0 - Carefully read your current employment contract.
Employment contracts in the tech industry will often have provisions that cover intellectual property assignment and other activities. These clauses typically stipulate that any ideas, inventions, concepts, designs (etc.) that you create during your full-time employment with a company are the sole and exclusive property of the company (and not you, the direct inventor). Depending upon the country/state/region, you may have some rights afforded to you if you create (and document as such) any inventions outside of the workplace without using any company trade secrets or technology, so long as your invention does not relate to the current or demonstrably anticipated R&D of the company.
Many companies have these types of clauses in their employment contracts for defensive purposes to protect the company against copyright claims from its employees. As a result, not all companies will enforce (via litigation) these provisions and ultimately don't care if their employees are building and releasing side projects in their spare time. However, some companies do care, so you should be clear about your legal status before jumping to start your company.
I generally avoid signing NDAs simply to hear or see a pitch/concept/prototype/etc.
The real question is "what are you gaining and giving up?"
Most entrepreneurs that I talk to are filled with their own concepts and ideas (and the hard part is usually the execution). Thus, entrepreneurs will often avoid signing NDAs in order to preserve their legal purity in the event that they independently develop a similar product. This is, I believe, the reason why ycombinator and most other large investment firms will not sign NDAs.
It would be interesting to hear more about potential evidence linking sun exposure and sunscreen to malignant melanomas as opposed to basal and squamous cell carcinomas. BCCs and SCCs, while malignant, do not pose the same risks of metastasis as melanoma, so I would be much more inclined to alter my behavior given such evidence.
In general (but not always) I like to assume that balance is the key. Life is carcinogenic, and too much of anything is probably harmful.
I think focusing in on skin cancers and skin aging is myopic. This is what all these analyses do. Yes, sunscreen probably reduces skin cancers and aging from sun exposure. But there is evidence that depriving yourself of sun exposure leads to a higher overall death rate. You dodge melanoma but increase risk of a heart attack or various internal cancers. People who work outside live longer, despite looking "weathered" in their old age.
- Cap table: what % is owed to other founders, investors, employees, etc?
- The total acquisition price may include substantial legal and other fees that will lower the actual amount received by the owners or shareholders.
- How much of the acquisition is financed through cash vs. equity? Equity may vest over a certain time period, and be subject to certain requirements (your sustained performance, ability to clear legal scrutiny, etc.).
- Taxes.
Taking all of this (and probably more) into consideration, it doesn't seem unreasonable for a founder to ultimately net <10% of the total sale price. Again, this is all wild speculation in this particular case.