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Ask HN: Company is firing all employees – should I still exercise my options?

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Ask HN: Company is firing all employees – should I still exercise my options?

#1

Post by Lindathefounder »

About 2.5 months ago I left my executive position at a promising blockchain startup. As I am nearing the end of my 90 day period for option exercising, i've come to know that the company sent out prior notice to all employees a few days ago, as it is struggling to raise money. All 3 founders are at work trying to raise capital in the upcoming month before money runs out and they are also planing on continuing to do so after all employees leave. On one hand, I am very hesitant to exercise because of the current status. On the other hand, the company has a remarkable product (which they might decide to sell) and the industry is still very much in it's diapers, meaning there is tons of true potential.

i have a lot of faith in the founders but the recent news really threw me off. Would love to hear your thoughts!

More information: -Company size: 15 employees -Exercise price: $20 (679 options/2.3% of the company) -Company raised from several VC's and also via ICO. -I still hold company's digital currency. -Status: recently launched product (fully functional) after 1.5 years of development with very few customers but high growth rate.

Re: Ask HN: Company is firing all employees – should I still exercise my options?

#3

Post by Lindathefounder »

who-knows95 wrote: post #2

are your hopes the company will sell to a larger business, and you will receive a large payout? sorry for the question, just don't know a huge amount about this stuff.

Yes, at this point I believe the company might sell the product or manage to raise sufficiently to rehire employees and exit at a later stage. In the first scenario the payout will not be as big, but it might still be significant.

Re: Ask HN: Company is firing all employees – should I still exercise my options?

#5

Post by jungong »

Lindathefounder wrote: post #3
who-knows95 wrote: post #2

are your hopes the company will sell to a larger business, and you will receive a large payout? sorry for the question, just don't know a huge amount about this stuff.

Yes, at this point I believe the company might sell the product or manage to raise sufficiently to rehire employees and exit at a later stage. In the first scenario the payout will not be as big, but it might still be significant.

It's brutal to fire all the employees and survives themselves / business. But guess you're right, the next move for them might be making some money from selling the product OR raise another round.

Re: Ask HN: Company is firing all employees – should I still exercise my options?

#6

Post by mchannon »

$13k for 2.3% of the company is one thing, but how about $13k for 0.023% of the company? Your company could be headed for a "washout round".

In the end it's a question of how dear that $13k is to you. If you've got millions in the bank, do it. If gathering that $13k would require you to max out a couple of credit cards and call in your last couple of favors, then don't do it.

Wherever you lie on that huge section in between is going to determine your decision, I think. There are a couple of companies that even for nonpublic stock will buy your exercised units, so if they value each unit/share at $200 then this is a simple decision: exercise and sell (some or all).

Alternatively, you might be able to stretch that $13k a lot further by investing in the next round. Get a good finger on the pulse of the ask price and see how low they'll go before they give up. Your $13k may be the lifeline that buys the company the 15 days it needs to not die, and should be valued accordingly.

Re: Ask HN: Company is firing all employees – should I still exercise my options?

#8

Post by cimmanom »

How would you feel, and what position would you be in financially, if you exercised your options and a month from now the company simply went out of business? Consider that a very real possibility. This does not sound like a company that’s in a good position to succeed.

Re: Ask HN: Company is firing all employees – should I still exercise my options?

#9

Post by muzani »

Very, very few companies do well after a large firing round. What I would look at is how they handled the firing. Did they do it respectfully? Did they apologize or did they blame the people who they fired? Is morale still high after the process? Did the founders handle the firing themselves or did they outsource it to someone?

Generally the companies that have done turnarounds after a firing round have done it respectfully. Often morale floors after a bad round, smart people leave, remaining people are unproductive. Combined with whatever reasons triggered the firing, most companies don't recover.

Re: Ask HN: Company is firing all employees – should I still exercise my options?

#10

Post by charlesdm »

Lindathefounder wrote: post #3
who-knows95 wrote: post #2

are your hopes the company will sell to a larger business, and you will receive a large payout? sorry for the question, just don't know a huge amount about this stuff.

Yes, at this point I believe the company might sell the product or manage to raise sufficiently to rehire employees and exit at a later stage. In the first scenario the payout will not be as big, but it might still be significant.

VCs generally have liquidation preferences on their shares, so if they put in $1m they will get their $1m back first if gains from a product sale are not in excess of $1m pro rated to their stock position. Something to keep in mind.
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