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My company sold for $100M and I got zilch – how can that be?

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Re: My company sold for $100M and I got zilch – how can that be?

#181

Post by anigbrowl »

antiviral wrote: post #71

I have found that in job negotiations, many startup founders are highly reluctant to discuss what the value of their stock option grant is worth, much less what other conditions may impact the payout. Has anyone else had this experience and what do they advise others to do when faced with the dilemma of turning down an offer due to a lack of transparency into the option grant?

There's no dilemma. Just do it.

The best way to get information about this is to ask you question and then shut up. You'll get a BS answer first. Just sit there and don't say anything. Most people break down after 30 seconds and give up more information. The longer you keep your mouth shut the more you receive.

It's totally OK to say 'this doesn't seem like such a great deal.' Don't answer questions about what you want - just reply that you don't know enough about their financials to know what they could agree to, only what you can agree to. If it starts going round in circles, think of it as a preview of future experience and decide whether you want to be in that position.

Re: My company sold for $100M and I got zilch – how can that be?

#182

Post by qroshan »

tibbon wrote: post #81

What questions (specifically) should have this person asked upfront when having their options offer prior to employment? What should have they asked long the way to check on when there were fundraising rounds?

You'll almost never get preferred shares unless you at C-level or put your own money.

The only thing you negotiate is more salary in cash and assume your options are just lottery tickets with very high odds

Re: My company sold for $100M and I got zilch – how can that be?

#183

Post by nitwit005 »

jammygit wrote: post #20

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?

Those companies that have spent years building reputations as nice places to work, with high salaries, and good perks. It's a bit unreasonable to expect everyone to be tempted by some possibility of equity.

I'd tend to assume that if you want highly skilled engineers at a reasonable price, you probably have to know them personally and sell the idea of building the company together to them.

Re: My company sold for $100M and I got zilch – how can that be?

#184

Post by alecbenzer »

badrequest wrote: post #3

As a normal individual contributor not at the C-level or even management level, I just assume the value of any options/shares I receive is zero unless an accountant or the IRS tells me I should believe otherwise. Too many goofy fine-print shenanigans like this to keep track of.

You can't possibly actually values your shares at zero. Test: can I have all of your shares? No? Well then you must value them at _something_. What if I gave you $1? 10? $100?

Just because something is (even incredibly) risky doesn't mean its value is zero.

Re: My company sold for $100M and I got zilch – how can that be?

#185

Post by harryh »

pgrote wrote: post #142

How does owning the 1% stock that doesn't get a pay out when the purchase occurs affect taxes? Do you have to pay taxes on the perceived value of the 1%? Can you consider it a loss?

Questioner probably owned options for which he paid no money. Therefore there is no loss. Nor is there a gain on which they owe taxes.

Re: My company sold for $100M and I got zilch – how can that be?

#186

Post by [deleted] »

harryh wrote: post #55
drtillberg wrote: post #39

From a 40,000 foot view, it's odd that employees who are investing their professional effort are relegated to a lower equity tier. I think the person asking the question in the article makes a valid point: why is it fair for human capital to be devalued in this way?

It's not odd at all. If you start a company and you turn $200 million of investment into an exit of $100 million dollars you haven't done anything valuable. Why would you expect your stock to be worth anything?

[deleted]

Re: My company sold for $100M and I got zilch – how can that be?

#187

Post by jeremyjh »

joekrill wrote: post #154

> Again, let me emphasize, this is not inherently unfair. I guess our definitions of what is "unfair" are quite different. I think a better term here would be "illegal". It's most certainly not illegal - but I definitely would not consider it fair . Companies throw options at employees - or potential employees - like candy. They imply, explicitly or not, that when the company gets big and successful, these options ar…

I think if a venture is unsuccessful employees shouldn't expect to make money from their options. A venture that raises $60MM and sells for $100MM 4 years later is a failure. Making nothing in a case like that seems fair to me. What is perhaps unfair, is if the employee worked for substantially below market wages all of that time, and particularly if they were given a much rosier picture than was accurate. But we shouldn't assume those things are always true.

Re: My company sold for $100M and I got zilch – how can that be?

#188

Post by arohner »

tptacek wrote: post #147
yitchelle wrote: post #105

Earlier quoted context omitted.

For those not so deep in the world of startup, can you give a layman's explanation of what Participating Preferred is?

As I understand it, from memory: I invest $100 for 20% of your venture. You sell for $200. Standard preference: I get $100, not $40, as my % would suggest, because I get at least every dollar I invested back. 2x preference: I get all $200, because I'm promised at least 2x my investment back. Participating preferred: I get $120 (I think?) --- I first get my invested dollars back, and then I still get my % of the ventu…

To expand on your example:

I invest $100 for 20% of your venture, implicitly valuing the company at $500 . You sell for $200.

- Standard preference: I get $100 or 20% of the company ($40)

- 2x preference: I get $200 or 20% ($40)

- Participating preferred: I get $100 and 20% of the company ($140)

IMO, 1x preference, non-preferred is entirely fair. In the event the company sells for lower than the valuation, the investors get their money back first. The vulnerability it protects against is that I found a company for $0, you invest $100 for 20%, then I immediately turn around and sell for $101. You get $20.25 and I get $79.75.

Participating preferred and >1x preference are unconscionable.

Re: My company sold for $100M and I got zilch – how can that be?

#189

Post by fiter »

tptacek wrote: post #148
ummonk wrote: post #146

Earlier quoted context omitted.

Often, founders get paid money directly as part of the acquisition to make them greenlight it.

How often is often? Can you name 3 such cases?

Often enough that it is mentioned in the article.

Re: My company sold for $100M and I got zilch – how can that be?

#190

Post by Florin_Andrei »

alecbenzer wrote: post #184
badrequest wrote: post #3

As a normal individual contributor not at the C-level or even management level, I just assume the value of any options/shares I receive is zero unless an accountant or the IRS tells me I should believe otherwise. Too many goofy fine-print shenanigans like this to keep track of.

You can't possibly actually values your shares at zero. Test: can I have all of your shares? No? Well then you must value them at _something_. What if I gave you $1? 10? $100? Just because something is (even incredibly) risky doesn't mean its value is zero.

How old are you?
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