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Rad told CNN that employees were told they'd be fired if they provided the correct information.Rad was on the board at the time, but he told CNN that he'd been pushed out of the conversations and was put in a position where he couldn't ensure that the valuation and the information given to the banks were correct.The statement said that Rad and other former executives who left the company a year or more ago "may not like the fact that Tinder has experienced enormous success following their respective departures, but sour grapes alone do not a lawsuit make." Tinder's 2017 valuation was set at billion, unchanged from a valuation that had been done two years earlier, despite rapid growth in revenue and subscribers.The suit charges that executives with Match and IAC deliberately manipulated the data given to the banks, overestimating expenses and underestimating potential revenue growth, in order to keep the 2017 valuation artificially low.The suit says they were told that if Tinder was successful they would receive a "founder friendly ownership" deal and would be given a majority the company.But once Tinder proved successful, they were given options worth only about 20% of the company, according to the suit.
The suit alleges that Match and IAC downplayed the impact of significant product features that Tinder was set to introduce, like a change that allowed a wider user base, as well as Tinder Gold, a premium version of the app that significantly increased revenue."By the time we had anything in contract, Tinder was already big," Rad said. The share of the company to which the early employees are entitled is not at issue in the suit; they ultimately agreed to the roughly 20% they were given."The early team gave it their all, and they sacrificed like any founder of any company does, or early employees of any company does. The question in the lawsuit is the value of that stake.On an investor call about the earnings report, Match's CFO told investors it now expects Tinder to generate 0 million in revenue this year, which he called a "phenomenal achievement." The suit says that is 75% higher than the 2018 estimate used in the 2017 valuation.The suit provides a fascinating look behind the scenes not only at the operations of Tinder, but also of the kinds of battles that can happen between technology innovators who create new companies and the investors who help to finance their early operations.