When WhatsApp, the mobile messaging app, was sold to Facebook for $16 billion on Wednesday, most, if not all, of its 55 employees were suddenly on track to become newly minted millionaires.
One WhatsApp developer celebrated by posting an image of empty Cristal boxes on Instagram — the photo-sharing site that had only 13 employees when it was bought by Facebook in 2012 for $1 billion.
It’s not clear how much each WhatsApp employee will bring home, considering that an engineer who joined the company when it was brand new in 2009 — and thus took a bigger risk— probably has a bigger stake in it than someone who joined after multiple rounds of funding.
(Jan Koum and Brian Acton, the WhatsApp co-founders, are now worth an estimated $6.8 billion and $3 billion, respectively).
Still, even a 0.1 percent stake, a figure that wouldn't be unusual for an engineer in a smaller company, comes out to $16 million. Not that they can spend it right away.
"They can't go too crazy," Seattle tech entrepreneur Tony Wright wrote in an email to NBC News. "Implicit in deals like this, usually, are clauses that keep all of the newly minted millionaires (and billionaires) from quitting the day after the ink dries."
That doesn't mean that outsiders will understand that workers gain control of their stock only after a period of several years.
"What is hard for people is that they're inundated by friends and strangers who pressure them to make big decisions quickly," Adam Nash, CEO of software-based financial adviser Wealthfront, told NBC News.
It’s a problem shared by athletes and celebrities who suddenly find themselves with millions in their bank accounts. In Silicon Valley, however, start-up employees are surrounded by a built-in support group: their fellow, newly wealthy employees.
"When something like this happens, there is a sense of relief that they’re finally getting their payday.”
They can also get advice from veteran techies, Nash said, who might have gone through a few IPOs and acquisitions — and possibly a tech bubble or two — themselves.
And while workers at start-ups tend to be on the younger side, in general, dropping cash like "Justin Bieber" on bottle service and flashy clothes is "rare among engineers," said Nash.
Of course, you probably won't find WhatsApp employees complaining about their new tax brackets.
“There are hundreds of firms that go belly up in Silicon Valley and a lot of people are left holding a bunch of worthless stock,” Aaron Rubin, a senior wealth manager at San Jose-based Werba Rubin, told NBC News. “When something like this happens, there is a sense of relief that they’re finally getting their payday.”
First published February 20 2014, 2:08 PM