The Close
The best thing that I ever did
One of the things I am proudest of was how Josh Reich and I handled the Simple sale to BBVA. Out of the $117M sticker price for the deal that closed in March 2014, $14.6M in cash was paid out to 100 employees excluding founders.
How did that $14.6M happen? First of all we fully vested and 100% accelerated every single employee’s options at close. Those new Customer Success employees who joined the company 6 weeks before the sale? They got 4 years of options fully vested and paid in cash. But that totaled up to only $6.4M. That just didn’t seem like enough. For Josh Reich and myself, this was going to be life changing money. We wanted our friends and colleagues to get as rich as we could make them. So we took another $8.2M off the top and distributed it to those 100 employees.
This was called the “Sales Transaction Bonus” in all the spreadsheets and contracts. But basically, we did it because we could. It was discretionary and we paid it out to folks who we knew had gone above and beyond, even if it wasn’t reflected in the cap table. We bumped some early employees to over $1M. 40 people got paid over $100k.
The Board was fully onboard with, and approved, this plan, even though it came out of their and their LP’s pockets too. Matt Harris, Roger Ehrenberg, Josh Kopelman, and Jerry Neumann are total mensch. This was good deal for everybody, and they were happy to spread the wealth around.
Also, as founders, Josh Reich and I had leverage. BBVA really wanted us to stick around. They reasoned that if we stuck around, the team would too. So we took a 60% reduction in our cash payout as a deferred earnout — we could make a lot more in 5 years, but only got 40% of our cash up-front. And not a single $ of the Sales Transaction Bonus went to founders.
The back-story here is that Josh and I never really wanted to sell. A pulled term-sheet forced us down the sale route in April 2013. The sale process took a while, but we kept talking to VCs as well. And by Jan 2014 we had options. I remember exactly where I was when I decided to turn down our final VC term-sheet. It would have been a $25M round from the best in the business. Sigh.
So BBVA needed us to stick around and the board needed us to not blow up the deal and sign up for a big clawback and earn-out. We could use our leverage, and we used it to get the largest “Sales Transaction Bonus” for employees that we could negotiate.
Josh, I, and the exec team spoke to each employee after the sale announcement. People came in thinking they were getting fired, and learnt they were rich. They couldn’t believe it. People cried. Others went out and bought houses. $400k is life changing money for a 23 yr old.
One of the best things I’ve ever done. After @Asha Karkal and @Aleshkarkal of course.
About the author
Shamir Karkal is the co-founder and CEO of Sila. A software engineer turned finance and banking expert, Shamir previously co-founded Simple and headed the Open Platform at BBVA. As a serial entrepreneur and fintech investor, he’s deeply involved in building the fintech ecosystem and proud to have been an angel investor in TransferWise, Alloy, EarnUp, MPOWER Financing, Fabric Insurance, and others. He is also a volunteer at iSpirt.
