Poll: How much did you earn from your stock options during exit? • Hacker News Board

Re: Poll: How much did you earn from your stock options during exit?

#171

Post by copper » Thu, Dec 08, 2011, 12:57 PM UTC

jdfreefly wrote: post #38

At the time I didn't realize how rare this was, but the company was sold for cash, all options were accelerated to vest at close and people were payed with a check. There was a 50/50 chance we could have grown the company to be very cashflow positive (ie - we sold too soon) and there was a 50/50 chance we would have folded (ie - we sold at just the right time). We were bought for our novel technology and the engineer…

Indeed - I don't think this happens very often. I was a small beneficiary of this kind of deal, and even at the time it struck me as an excellent deal. Mind you, I attributed it to working with really good VCs and founders.

Re: Poll: How much did you earn from your stock options during exit?

#172

Post by danssig » Thu, Dec 08, 2011, 1:00 PM UTC

Timothee wrote: post #102

fourk wrote: post #51

First employee hired at a startup. Paid for my options before leaving the company. Six months later the company was acquihired by Google. Three months after that I was given paperwork informing me that those shares are now worth exactly $0.00/each. Founders made out well enough from the deal to pick up high-end luxury sports cars though, which is the important part of an exit, right?

A comment below tickled my interest and I did some quick googling. From the information available on the web, it looks like your comment makes what happened look much worse than the reality. So I just want to point out to others that this is one side of the story and it lacks a lot of details to draw any conclusion and ask for the names of the "guilty". edit: since I'm getting some downvotes, let me expand a bit: it…

>A comment below tickled my interest and I did some quick googling.

You should be downvoted to hell for this stupid comment. You did "some quick googling" and now feel qualified to talk over people who were actually there? This kind of behavior is the plague of the internet. Someone who was actually present takes a back seat to a nerd reading the internet about it.

Re: Poll: How much did you earn from your stock options during exit?

#173

Post by danssig » Thu, Dec 08, 2011, 1:08 PM UTC

nerd_in_rage wrote: post #152

malbs wrote: post #63

Earlier quoted context omitted.

I had a similar experience, a VC bought "preferred stock" (I can't remember the exact jargon), when the company was sold, the payout went entirely to the VC, and no standard stock holders received anything.

yes, this happened to me, too. shocking. ;) not really. it's pretty expected. stock options are lottery tickets.

No way, they're much worse than lottery tickets. They're lottery tickets that even if you do win, some jerk can come along and make your winning ticket worth nothing after the fact.

Re: Poll: How much did you earn from your stock options during exit?

#174

Post by danssig » Thu, Dec 08, 2011, 1:29 PM UTC

sliverstorm wrote: post #157

I'm surprised how many are in the "greater than $11M" bucket. Was that perhaps just multiple people from a small handful of companies?

It's founders or BS.

Re: Poll: How much did you earn from your stock options during exit?

#175

Post by HelgeSeetzen » Thu, Dec 08, 2011, 2:25 PM UTC

I am surprised by the distribution. Does the upper end (>$11M) represent founders or really just non-founding employees (I guess the Google-generation?)? I see 66 votes but not a single comment from anybody in that bracket.

It's unfortunate that ESOP has such a bad reputation. I have never been a non-founding employee, but my last venture paid out about $3M net to about 20 non-founding employees and 30 interns (about $4.5M gross before strike price). Roughly 10%/15% net/gross of the exit value. Ranging from high 66 digit all the way to 3 digits (for late-stage 4 months interns).

In my latest venture we simply give common shares to employees (reverse vesting but otherwise the same as the rest of the cap table).

Re: Poll: How much did you earn from your stock options during exit?

#176

Post by jaxn » Thu, Dec 08, 2011, 4:05 PM UTC

Nate75Sanders wrote: post #94

tptacek wrote: post #30

Earlier quoted context omitted.

You're suggesting that having classes of shares is unconscionable? If the idea of preferred shares shocks your conscience, you should spend a lot more time studying how startup financing works (at a nuts and bolts level) before taking the plunge and working at one.

I'd appreciate it if you can recommend some books/articles on the subject.

Brad Feld and Jason Mendelson released an excellent book this year.

Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist

http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

Re: Poll: How much did you earn from your stock options during exit?

#177

Post by lutorm » Thu, Dec 08, 2011, 4:40 PM UTC

nsxwolf wrote: post #32

lutorm wrote: post #7

Maybe there should be an option "None - never had stock options"?

The wording of the question negates the necessity of that as a choice.

True, but it might be interesting to gauge what percentage of HN readers actually do have options.

Re: Poll: How much did you earn from your stock options during exit?

#178

Post by MercuryPDX » Thu, Dec 08, 2011, 5:16 PM UTC

The only company that I was working for that did offer stock options required that we rescind them (two years short of when most of us were to be considered vested) in order to participate in the new company matched 401K program.

They never wound up going public and got bought out by a larger company.

Re: Poll: How much did you earn from your stock options during exit?

#179

Post by blacksmythe » Thu, Dec 08, 2011, 6:27 PM UTC

tankenmate wrote: post #169

jaxn wrote: post #88

Earlier quoted context omitted.

There have been several comments on here lately that make me realize how few people actually understand how equity works in startups. I mean, if people are shocked to learn about preferred stock, what would they think about participating preferred?!? I guess this is really something you only learn when you are the one signing the financing docs.

It's not so much the fact that they are preferred stock but that you could argue that the stock is re-purchased at what could be considered to be less than market value. Imagine if you will a publicly traded company that repurchases preferred shares, right before the company agrees to be acquired, for substantially less than the post acquisition valuation. You bet there'd be law suits.... Nonetheless your point stand…

  >> You bet there'd be law suits....

The legal protection for employees of privately traded companies appears to be considerably lower than for stockholders of publicly traded companies.

  >> if you are considering acquiring preferred stock ...

Generally preferred stockholders are treated pretty fairly. Employees get common stock. 'Buyer' beware.

Re: Poll: How much did you earn from your stock options during exit?

#180

Post by tptacek » Thu, Dec 08, 2011, 8:17 PM UTC

blacksmythe wrote: post #179

tankenmate wrote: post #169

Earlier quoted context omitted.

It's not so much the fact that they are preferred stock but that you could argue that the stock is re-purchased at what could be considered to be less than market value. Imagine if you will a publicly traded company that repurchases preferred shares, right before the company agrees to be acquired, for substantially less than the post acquisition valuation. You bet there'd be law suits.... Nonetheless your point stand…

>> You bet there'd be law suits.... The legal protection for employees of privately traded companies appears to be considerably lower than for stockholders of publicly traded companies. >> if you are considering acquiring preferred stock ... Generally preferred stockholders are treated pretty fairly. Employees get common stock. 'Buyer' beware.

That's because employees generally can't negotiate the terms of stock grant (exceptions to the employee stock option contract are often board-level decisions), but every venture funding deal is heavily negotiated with lawyers on both sides.

Generally, a company wants to get the best deal with the most lax terms possible, and will try to accomplish that. The preferences given to investors are part of the market pricing of an investment deal. You can no more declare that investors shouldn't have liquidation preferences than you can declare that they should price the deal 50% higher.