The Developer Compensation from the Quip Salesforce Acquisition: An In-Depth Analysis

When the productivity software company Quip was acquired by Salesforce in 2016 for approximately $750 million, speculation arose regarding the financial gain for the employees who held stock options and equity stakes within the company. This article delves into the potential compensation for Quip employees and provides a detailed analysis of the financial scenario.

Initial Funding and Valuation

According to Crunchbase, Quip had approximately $45 million in funding by the time of the acquisition. Assuming a 4-to-1 liquidity preference, which is common for venture capitalists, the total value attributable to the VCs would be around $180 million. At Quip's Series B funding event where it raised $30 million from Greylock and Benchmark, it's reasonable to estimate the post-money valuation at the time of the acquisition at no more than $60 million. This valuation implies that each share was worth $4, with a total of 15 million shares outstanding. Each employee, given 10,000 shares and a 4-year vesting period, would have owned a portion of this equity.

Stock Options and Employee Compensation

At the time of the Series B funding, stock options might have been priced at $0.50 per share. The acquisition of Quip by Salesforce for $750 million could have resulted in significant financial gains for the employees who held these options, especially if the 4-to-1 liquidity preference was applied. Assuming the VCs chose to partake in the liquidity preference, the employees' shares would only get their full value after the VCs were compensated. The net amount available for employees would be $510 million, or approximately $34 per share.

The average employee, having 10,000 shares, could have seen a total gain of $340,000 over a 4-year vesting period, assuming no other vesting accelerations were granted. However, it's possible that some employees experienced accelerated vesting as part of the acquisition process, which would have pushed up their potential gains.

Speculation and Limitations of the Analysis

The analysis presented here is purely speculative. There is no publicly available information regarding the actual financial details of Quip at the time of the acquisition. The figures used are based on assumptions and estimates, reflecting the common practices in venture-backed companies and the general trends in the tech industry. It's important to note that the actual compensation received by employees could vary significantly depending on individual equity arrangements and the specific terms of the acquisition.

Conclusion

While the exact amount that Quip employees received from the acquisition is not publicly disclosed, it is likely that those who held stock options and equity staked in the company had the potential to realize substantial financial gains. These gains would depend on their specific equity arrangements and the terms of the acquisition transaction. The speculation provided here offers a rough estimate based on the available financial data and general practices in the industry, but the true financial outcome for each employee remains unknown.