This bit from the employee announcement about how they're handling equity vesting [1] is worth highlighting as a pretty classy move, all things considered:
> We’re waiving the one-year equity vesting cliff for all departing employees so that everyone has an opportunity to be a shareholder, regardless of your tenure. [...] All departing teammates will qualify for an extended option exercise period of 5 years, and we have extended it to 7 years in regions where we are legally able.
It must be jarring to be on the receiving end of a layoff. In the grand scheme of things, a laid-off employee surely has bigger things to worry about... but I still think what they did here with the equity, especially the option exercise period, is a nice touch. Not many companies do this sort of thing, but they should.
They say there's 3 months of pay, healthcare, mental care until the end of the year too. And they contracted a placement company to hook people up with new jobs.
Some of this is because of the WARN Act in California [0], which requires 60-day notice before any mass layoff. Employers can also fulfill the requirements of this mandate by letting employees go now but having their actual termination date 60+ days in advance. I've been survived a few layoffs that work this way.
Good for Patreon to go beyond the 60-day mandated period though
WARN Act is federal law not CA Law. I highlight this because there is a belief that only CA has employment protections laws, and while CA does have more of these; other parts of the US also have employment protection laws often times not really that much different than CA
Both CA and Federal is 60 days, the main difference is CA requires employers with over 75 employee's federal is 100, and CA includes Part Time employees in the count Federal is Full Time workers only
There are probably a large number of HN readers that have weathered the dotcom bust, the 2008 financial crisis, and the 2022 financial crisis. If you were born 1980-ish and you haven't been laid off 3 times, congrats!
It's pretty easy to get laid off a lot if you work in startups. You join and know there is a ticking clock in the background. If you don't, you probably should.
Every startup thinks they are the 1 out of 10 (because why wouldn't they, you have to.)
I agree, I have never actually been fired from a collapsing company, but as an intern I have been in the meeting room when a company was folded, and I have also seen a few companies collapse after I left. I'm a realy early guy, I tend to leave when the timesheet comes, so there is probably some runway left when I leave.
I was born in the 60s and haven't been laid off yet, including during the dotcom bust, all while working for 12+ companies in my career. The bust was the worst, though, our company went through 7+ layoffs and we were decimated, and no one did any real work after a while. Fingers crossed that I can keep this trend until retirement!
Being laid off twice was a rewarding experience both financially and for my career. It forced me to step out of my comfort zone. Now, being outside my comfort zone is my comfort zone.
In the first layoff I knew the company was planning a round in the next 18 months and I'd been there 6 years. I waited around for the payout. Layoff law in Australia is more favorable to the employee, the payout was 10 months. I took a week off before starting the next job on a substantial salary increase.
The most important is not to take it personally as a failure. That can mess with self confidence and interview performance and general well being. At my HR interview they had the team there and some "transition coach" they seemed worried about us. I was actually thrilled as I planned to leave anyway.
>"There are probably a large number of HN readers that have weathered the dotcom bust, the 2008 financial crisis, and the 2022 financial crisis."
The "2022 financial crisis"? That's not even a thing. Slowing economic growth and even a recession, should we enter one later this year does not constitute a "financial crisis."
By most historical measures of recession, we're already in one. This redefining of what constitutes a recession is a recent phenomena, and has political roots, not financial ones.
>"This redefining of what constitutes a recession is a recent phenomena, and has political roots, not financial ones."
There has been no "redefining" nor is it a recent phenomenon nor does it have political roots. You are wrong on all accounts.
It doesn't have political roots. The National Bureau of Economic Research(NBER) is a private, non-profit, non-partisan research organization with an aim is to promote a greater understanding of how the economy works.
The nonpartisan panel, which was established in 1978 by former Ronald Reagan adviser and NBER president Martin Feldstein, has gone out of its way to keep politics out of the process.
The committee meets in secret and doesn’t announce its gatherings in advance or even in retrospect, unless there’s a press release declaring a formal decision.
And it typically takes the panel about a year to decide on a recession call, though some decision have been made in a few months while others have taken almost twice as long. That’s almost always well after a recession has been widely recognized by Wall Street.
The committee has never reversed a call.
Rather than two negative GDP readings, the NBER is looking for a substantial decline in activity over a sustained period of time. The committee sets dates of the peaks of economic activity and troughs based on six monthly data series, including nonfarm payrolls, personal consumption spending and industrial production.
Again, a recession is not at all the same thing as a financial crisis. This is the thing I was commenting on. There is no consensus that we are even in one. Recessions are always backward looking.
It's pretty spectacular though that not only have been able to declare that were in one but you are also able to comment with confidence on how bad it's going to be be.
> If you were born 1980-ish and you haven't been laid off 3 times, congrats!
This depends on where you worked. Most of the developers I know were around for the dotcom bust, but only 2 have experienced a layoff. But none were working for dotcom companies.
This, I've been laid off about 6 times, only once because of my own accord (and I freely admit my fault there). I've left a company 2x that count. I started my career in 1999. What a year to start...
Very much so. I've had to explain that some of them were just contracts, some of them cease to exist anymore, and some went through layoffs. The reality is it's more like 13 companies but yeah.
Don't sweat it. Most human resource departments take their methods from Kafka's The Trial. The more you look the better you get at it, the easier the brutal process of some employers' hiring processes become. Fire and forget. The more applications you complete, the better your chances of getting hired, and once hired, the longer you work, the further disappointment retreats in your rearview.
Yup! Exactly. It’s a numbers game. I’ll never work at a FAANG probably because of it but that’s ok. I’ve carved out a pretty cool career AND I do side projects and games so it’s fine.
I joke with my friends in other industries about how often I have been laid off. For me, it's been uh...5 times? Maybe 6. I am probably forgetting them. None of them were very small but like usual characteristically overextended. One company I survived 4 full rounds of layoffs before getting axed. Another one I survived 3.
It's the nature of playing around in the high stakes startup world. As I've gotten older I've found more stable companies. But it was quite funny coming home once every few years to tell my girlfriend I was laid off again and then picking up another job a week later.
During the dot com downturn the consulting company I was at went through 2 or 3 rounds of layoffs. Then in the 2008 fallout, there was another round. If one is lucky enough to survive them, they could be witness to many but not be a recipient of any.
I worked in an industry that's highly cyclical and had major consolidation over the last decade (HDD/SSD storage). We bought several companies and they would do layoffs roughly every 18 months or so.
Unless you're in government/health. You're going to lucky not to be laid off multiple times in your career and if you're not laid off at all in your career, consider yourself extremely lucky.
I agree. Tech companies should never really break off with former employees. Any former employee is a future potential employee that you can re-recruit when the time comes. Also, talent is difficult to find. Which makes people the center. Whatever you build, you will build it with people. So you need people. Be them new employees, be them former employees.
> Any former employee is a future potential employee that you can re-recruit when the time comes
Not only that, all former employees are de-facto "background check references" / "evagenlists" / "detractors" of your company. Forever! (well, not exactly forever... but close enough)
I can't recall a single year over the last 10 years where younger engineers, cousins, nephews or friends have asked me about the 2 companies I worked at before.
And boy, have I been candid.
Talked a very good friend of mine from joining Amazon for an offer he got making nearly 3 times much I did. All because of "decency" (or lack thereof) of a company.
Amazon has really developed "not giving a shit" into an art form. They even still have the cliff vesting of RSUs, which is their way of telling new hires "we don't expect you to stay for more than 2 years"
I had some unkind feelings about Patreon when it was announced / made public that they laid off their entire security team. I still think that was a poor move and any company responsible for handling payments ought to have an in-house security team.
That said - I've held off on any criticisms around their strategy/execution for the moment (aside from that) since it's unclear what happened. I'm wondering if Patreon is getting hit with lots of people backing off support of artists after a big jump due to the pandemic.
Given inflation and a lot of feelings of uncertainty around the economy, it wouldn't surprise me to learn that their revenue went way down in a hurry this year.
I back four artists on Patreon, down from five a year ago. In all 4 cases I'm either too busy to get full "value" out of sponsoring (e.g., I don't have time to read the updates or listen to all the demos), or there's not really any benefit other than funneling money to support the artist in hopes they'll continue working as an artist.
Each month I look at the bill from Patreon and wonder "do I really need to keep spending this money?" So far I've elected to - but I haven't been hit super hard by inflation or a layoff like many folks...
They didn't lay off their entire security team. What one person among the laid off ones thought to be 'security team' may not overlap with what their company had been doing since a long time. In startups, its not uncommon to have engineers who have been handling various responsibilities, including security (especially early employees).
> In startups, its not uncommon to have engineers who have been handling various responsibilities, including security (especially early employees).
You're right!
That said, by the time a company is large enough that 17% of it is more than 17 people the kind of startup organization you have wisely and correctly nodded to will have ceased to exist.
So while you are right in that such scenarios have, do, and will continue to happen there's perhaps cause to wonder if that's really the best way to characterize replacing a security organization with specialists with a bunch of engineers who are likely quarter-time security at best. It's akin to firing all your engineers because the sales people can do a little bit of coding each.
> That said, by the time a company is large enough that 17% of it is more than 17 people the kind of startup organization you have wisely and correctly nodded to will have ceased to exist.
Not really. A lot of stuff having moved to services, a lot of stuff being handled in 'no code' manner have simplified organizations a lot these days. Today you can just offload a lot of things to SaaS vendors that can automatically handle those stuff. Instead of having to have entire teams dealing with it like how it was in the earlier decades. You just need a host of capable people to deal with those services on your side, by wearing various hats. So the 'startup format' seems to have become extended to larger organizations.
Agreed, its not ideal but there are things a company can do to put their money where there mouth is in this situation. This seems to be the new playback for doing it right. I appreciate that.
This is exactly how to handle a layoff: do it 3-6 months earlier than required and give the laid off employees that money as severance. Waving the equity cliff too is very generous and good of them.
Everyone should note the companies that do brutal layoffs with little/no severance. It's a major red flag because it shows incompetence and/or a lack of ethics.
I don't like a lot of their business decisions (I know much of this is driven by credit card/payment processors) but this is the most respectable mass layoff I've ever seen from a company, and should be lauded.
If not, I've had a lot of incredibly decent employers in the past. They all seem to do two or three months. I know of layoffs where people have gotten significantly more, though.
I always thought it was awesome that a company to support creators was creator lead. I came across Jack Conte in 2010 before Patreon existed. He was a music creator on YouTube that made what he was calling Video Songs, songs with each instrument part video'd and mixed together, and selling his music collection through e-junkie at the time. He was one of the first creators I ever financially supported. Some of the videos are still up on YT: https://youtu.be/D2PwVkQBp5o
Despite not knowing Jack personally pretty much everything I've seen from him over the years has reinforced my generally high opinion of him. In this case as well. As lay-offs go Patreon seems to be trying very hard to do right by their employees.
As a former Patreon team member, he has done an incredible job of attracting creator-focused team members -- one of the most mission oriented groups I've ever been a part of.
Don't mistake that for being a good CEO. He gives deep-felt apologies every time he does layoffs... which he does frequently. Often because he just doesn't like what people are doing. He also frequently communicates with the public in a more heart-felt manner than he does his own employees. He's great at putting out a great face.
- 2019, September layoffs (can't find the links for these ones)
- 2019, June layoffs
- 2018, June layoffs
Also, to be clear. I was not one of the ones laid off. But I did see my entire team besides my manager vanish one day and then be told I'm expected to do the team's work for the next 6 months.
Yeah, I'd imagine in many respects he's unqualified to be a good CEO since he, as far as I can tell, essentially stumbled sideways into the role as co-founder. There's the upside of the CEO being a creator themselves but the downside of not having a background in business or necessarily the other qualities a good leader possesses.
Patreon has a great mission though and I can see how it would attract creator-focused team members. There are some impressive Patreon alumni in their own right.
Correct me if I'm wrong, please, but since the equity is all options, doesn't that imply that they're making it easier for people to give them money?
Yes, sure, they have to dilute the company a bit by creating more stocks for the people buying it, but if your company is in enough trouble that you're laying off 1 in 6 employees, it seems financially wise to effectively be doing many small rounds of fundraising this way. It extends your runway some small amount.
Ah, that's a good point. It's sort of the opposite: now the option holder can wait longer to decide if this is a worthwhile investment, vs "You have 30 days to exercise this or you get nothing".
The ability to extend that period isn't always up to the option-granting company; while it is possible for non-qualified stock options (NSOs), incentive stock options (ISOs) must be exercised within 90 days of termination of employment, by law.
> what they did here with the equity, especially the option exercise period, is a nice touch.
But it's not all that great. Patreon is not publicly traded, so it seems likely that exercising any options will require cash up front, plus it will immediately trigger taxable compensation (income tax plus FICA). And how will the FMV be determined, if there is no public market trading? (ans.: usually just some number voted on by the board). It may well be that the options are never worth anything even after the extended period.
It is clear that these are not ISOs (statutory options), because statutory options by law only allow up to 3 months to exercise after employment ends.
To me, this seems a little odd to complain about given that all those factors were true about the equity compensation when people signed on. The company didn't fundamentally do a bait and switch or change the rules.
Layoffs suck but I found the extended exercise windows and other benefits to be rather pleasantly responsible given the situation.
FMV is determined by a 409a valuation, it’s an imprecise thing but it’s done frequently even for private companies and all employees will know the FMV of the shares. Not just a made up number by the board.
They are likely NSOs and with an extended exercise period the former employees do not need to exercise them. They can just hold them and if within 7 years there is a liquidity event, they can exercise & sell. The taxable event would only be upon exercise, so in the case the former employee just holds the options (which is almost certainly what they’ll do), there is no immediate tax impact, nor any sadness about the options expiring. Upon a future E&S they’ll have taxes to pay but also money from the sale to pay the taxes.
Yes the situation could be more complicated if the person were trying to optimize the tax situation but I think that is very unlikely to apply in this situation. Just hold the options and be happy.
And really PopAlongKid, why are you so critical when you really have not even a basic understanding of how this works?
I was neither complaining (previous reply) nor being critical. I was just saying that at best extending the exercise window was pretty neutral, not some nice benefit funded by the company like extra severance pay or extended health insurance. Most of the comments seemed to be vastly over-valuing this particular aspect of the layoffs.
And if Patreon is acquired some day rather than going public, the employee shares are probably going to be last in line after all the VC money (preferred share classes), and maybe not worth anything. I went through this when I worked for a dot-com startup in the early aughts. Even if they do go public, there will probably be lock-up periods to restrict the immediate selling of shares, and then you are at the mercy of the stock market, where the value of the company (which you long ago stopped having any input to) could well put your shares into loss territory.
The shares can’t lose money (in theory) because with the extended exercise period you can simply not exercise them if they are underwater.
It's not a unique benefit, many companies offer the extended exercise window, but it is very good for employees because otherwise they have 90 days to exercise or abandon the options.
In your mind you are imagining somebody with a few options that are barely in the money. What if somebody who got laid off has worked there for 5 years and is sitting on super valuable options. With no extended window they'd be in a huge pickle where they'd either have to abandon all their options or pay a huge exercise/tax bill right now. But with the extended window they don't.
Neither of us can predict the future of patreons valuation so you shouldn't assume things are going to go badly and thus this benefit will not matter. The whole point of stock options is the option part of it. Maybe it will be worth a lot, maybe it won't, but you'd like to wait and find out and shouldn't have to give that up because you were laid off.
>The shares can’t lose money (in theory) because with the extended exercise period you can simply not exercise them if they are underwater.
Incorrect. Yes, one would not exercise options that are already underwater, but once you own the shares and there is a post-IPO lockup period[0] you most definitely can lose money on the shares, money on which you already were taxed at ordinary tax plus FICA rates. Try looking at the volatility of company share prices in the period immediately after their IPO.
>you really have not even a basic understanding of how this works?
You also have not addressed the strong possibility of being acquired rather than going public. (Ex-)employees do not make any money until after all the VC people do, and there may not be much left.
Again, I never said this was a bad thing, more like a "meh" thing.
Exercise and sell is an instant prices. If you choose to exercise and hold obviously you now have the volatility of owning the stock, I'm not talking about that.
Yes preferred share classes exist, this is irrelevant to whether or not the options have option value! I'm not guaranteeing that Patreon stock will be worth a lot of money, only that it might be worth a lot of money.
This is incorrect. You cannot exercise ISOs after 90 days post-employment. What you pay to the company at exercise isn't time dependent: the strike price is fixed at time of grant. What you may be referring to is the AMT, which does fluctuate depending on FMV at time of exercise, but that doesn't affect the 90-day limit.
Yea I wasn't completely clear I the description, not remembering exactly at the moment. Thanks for pointing out. I was referring to the option some employers will offer to convert ISOs to NSOs after 90 days. So yes you're technically not exercising ISOs after 90days. My point more being that there are options with some employers to not completely loose all rights to equity after 90days.
This is true for liquid options. Startup options are not liquid, there is a chance they’re illiquid until the company folds or is bought- and in an acquisition of a struggling company they’re likely to prioritize higher share classes before common stock gets to see a piece of the price.
What? These are public companies; short-dated OTM options have > $0 value only in volatile markets. But these companies don't pay employees in options.
> We’re waiving the one-year equity vesting cliff for all departing employees so that everyone has an opportunity to be a shareholder, regardless of your tenure. [...] All departing teammates will qualify for an extended option exercise period of 5 years, and we have extended it to 7 years in regions where we are legally able.
It must be jarring to be on the receiving end of a layoff. In the grand scheme of things, a laid-off employee surely has bigger things to worry about... but I still think what they did here with the equity, especially the option exercise period, is a nice touch. Not many companies do this sort of thing, but they should.
[1]: https://blog.patreon.com/a-note-from-jack