121–130 of 391 posts
Earlier quoted context omitted.
Even more insidious: Participating Preferred, which is effectively double-dipping.
For those not so deep in the world of startup, can you give a layman's explanation of what Participating Preferred is?
I feel like legal manipulation is very bad for the startup ecosystem. Even here, at the YC forums, people assume their startup equity is worth $0 and advise you to go with a FAANG (or day that they broke even with friends at faangs after their exits). How is a legitimate startup supposed to recruit the best people under these conditions?
By being transparent and giving all the numbers needed for the employee to make a good decision. For what it's worth, I've always valued options at private companies as zero in making career decisions and looking back I don't think that heuristic ever steered me wrong (even at a company that is now a "unicorn")
Passionate young programmers who want to work for a startup don't have the background to understand it, even if the raw information is given when signing up.
Plus, you have no idea what the next round of funding will do to the equity structure...
Isn't it time for regulation to limit this complexity?
Liquidation Preference. In very simple terms: "Liquidation Preference" is an agreement between a company and an investor that when the company is acquired or IPOs, the company will pay the investor some specific amount of money BEFORE any other shareholders get paid. If the company negotiated the funding well, the liquidation preference might be 1x (basically saying the company promises to pay back, in full, the inve…
It always baffles me when the top comment isn't discussing the article, but provides a response to the headline as if the article doesn't even exist.
I know of a company that was sold for $1bn+ and common equity got almost zero. It happens, it is a very silly thing to angry about though (because the valuation was never $1bn+).
For anyone thinking about working for startups: - don't treat verbal agreements seriously - common stock is 99.9% worthless, you want preferred stock - liquidation preference is important, if company doesn't want to tell you, insist on market-rate salary - if a company tries to switch from an LLC to C-Corp and move you from being a minority owner of LLC (0.1-3%) into a common-stock owner of a C-Corp with the same %,…
For anyone thinking about working for startups: - don't treat verbal agreements seriously - common stock is 99.9% worthless, you want preferred stock - liquidation preference is important, if company doesn't want to tell you, insist on market-rate salary - if a company tries to switch from an LLC to C-Corp and move you from being a minority owner of LLC (0.1-3%) into a common-stock owner of a C-Corp with the same %,…
For anyone thinking about working for startups: - don't treat verbal agreements seriously - common stock is 99.9% worthless, you want preferred stock - liquidation preference is important, if company doesn't want to tell you, insist on market-rate salary - if a company tries to switch from an LLC to C-Corp and move you from being a minority owner of LLC (0.1-3%) into a common-stock owner of a C-Corp with the same %,…
In what universe is an employee getting preferred? Or do you mean, be an investor instead of an employee?
There should be a simpler way. All this crap is too complicated. Even if you manage to somehow do the research and understand it well at some point, unless your working with options grants on a regular basis, you'll probably forget it all before you ever leave the company. People don't have time to do all this stuff and not get fucked over.
Even if you get all the information when signing up at an early-stage startup, you have no idea what the founders will negotiate in future rounds
Earlier quoted context omitted.
Probably not a company with any professional investors on board.
Correct. The founder probably retained 90% or more of the stock, its growth was completely organic. I was very lucky to be part of it.