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

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

#181

Post by Timothee »

danssig wrote: post #172
Timothee wrote: post #102

Earlier quoted context omitted.

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.

You might want to calm down on the unnecessary attacks.

As I said in my original comment "I just want to point out to others that this is one side of the story", because some people wanted to have the names of the company and people involved to make sure never to do business with them.

On one hand, you have the (short) account of one person who was there; on the other, you have some information found on the web. Neither is reliable, they just give some hints at what might have happened. My comment was just pointing that out, since some people wanted to go do some public lynching.

So you see, in my opinion, your comment should be "downvoted to hell". I was careful to emphasize that what I found wasn't "the truth, the whole truth and nothing but the truth" either. Here's a sample: "it looks like", "this is one side of the story", "it looks like", "it's not clear", "and again I don't have the whole story either".

So no, I'm not the plague of the Internet. The unnecessary outrage and name-calling is.

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

#182

Post by tlrobinson »

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?

It sounds like Google hired the founders (probably with a nice signing bonus), and threw in enough money to appease the investors. The investors' terms likely included liquidation preference, so I'm not surprised you didn't get anything.

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

#183

Post by Timothee »

fourk wrote: post #112
Timothee wrote: post #102

Earlier quoted context omitted.

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…

I did not in any way expect this to be a serious windfall for me. I also didn't mean to imply that this was a windfall for investors (who were merely reimbursed), or anyone but founders (albeit a small one for them). Also, while IANAL, that paperwork implied that the company was purchased by Google (at least technically), contrary to what Techcrunch said. Part of my reasoning for not wanting to name the company and f…

Part of my reasoning for not wanting to name the company and founders was this exact reason

And I salute you for that. Don't get me wrong, I didn't mean to confront you or to expose the situation more than you wanted. (what I read is very easy to find anyway) It was more intended to the commenters who wanted names even though we had only your short account to go by.

Clearly, that kind of situations has happened to many startup employees (and will happen again and again…). I worked myself for a startup that folded, most people took their severance package and two months later the company was apparently sold. I don't think any of the employees really know the details of the sale, but I'd very surprised if it turned out that I had missed out on a big payout by not buying my options… :)

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

#184

Post by waqf »

_yobq wrote: post #165
kinkora wrote: post #67

Earlier quoted context omitted.

No, James is doing the right thing taking a more noble path and not publicy defaming the company. There is a time and place for that and these sort of discussions will not be conducive for the HN community. Talking about his experience will be what most of us be interested in. Having said that, all you need is 2 minutes, google and you can easily deduce yourself what company he is referring to.

An easier way to publish the info without defaming the company is to encrypt it with ROT13.

Encrypting with ROT13 does not cause you to be not defaming the company, either legally or ethically. (Encrypting with SHA-1 might, but I wouldn't bet your out-of-court settlement on it. IANALATINLA.)

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

#185

Post by kokon »

pfarrell wrote: post #76
spinlock wrote: post #62

Earlier quoted context omitted.

Wait. Why would you do this? Can't you hold your options as, well, options until you want to exercise and sell them? I don't get why you would convert options to stock unless you wanted to sell them right away. I'm sure I'm missing something. Thanks.

I am having to get ramped up on this right now as my company is filing. I'm not 100% positive, but, I believe if you exercise and sell in a single transaction, you're going to get hit with ~40% short term capital gains tax. Holding the exercised stock for a year will reduce the tax hit at sell time to ~22% long term gains.

A bit of advise, you need to compare between capital gains vs stock loss. Most problems come when the stock is losing 40% of its value, and still keep it in order to avoid capital gains, ended up losing even more.

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

#186

Post by blacksmythe »

tptacek wrote: post #180
blacksmythe wrote: post #179

Earlier quoted context omitted.

>> 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 pricin…

  >> You can no more declare that investors shouldn't have liquidation preferences ...
Not suggesting that. In fact, I have no objection to any clauses or terms that are negotiated in the original funding, although employees don't always have access to the terms in these agreements. However, these negotiated terms merely form an upper bound to what employees actually get.

There are a variety of situations in which the investors end up with more than the original agreement would suggest, and employees end up with less. Some of them are discussed here: http://news.ycombinator.com/item?id=2958766

Founders sometimes end up with an outcome similar to the investors, but more often an outcome similar to the employees. Employees expect that their interests are aligned with the founders, and that founders will protect them, but this is not always the case.

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

#187

Post by ajju »

rjurney wrote: post #150
tlb wrote: post #117

Earlier quoted context omitted.

Less than "most" good founders were employees at hot startups. I base this on a good deal of data.

Evidence that "most" good founders were employees at hot startups, and that most important companies that generate the most wealth occur in 'networks of success': https://s3.amazonaws.com/rjurney_public_web/images/Atlanta-S... https://s3.amazonaws.com/rjurney_public_web/images/fairchild... http://en.wikipedia.org/wiki/PayPal_Mafia#Membership

I dare say it's time to add RideCell to that cluster, one node from CipherTrust :)

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

#188

Post by pfarrell »

mjs00 wrote: post #163
timr wrote: post #155

Earlier quoted context omitted.

long-term cap gains are 15%, not 22% -- until 2013. unless congress intervenes before then.

pfarrell may be combining the federal 15% long-term rate with whatever his state tax rate may be?

My research is definitely spotty, so I totally appreciate the comments here!

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

#189

Post by pfarrell »

jen_h wrote: post #149
pfarrell wrote: post #76

Earlier quoted context omitted.

I am having to get ramped up on this right now as my company is filing. I'm not 100% positive, but, I believe if you exercise and sell in a single transaction, you're going to get hit with ~40% short term capital gains tax. Holding the exercised stock for a year will reduce the tax hit at sell time to ~22% long term gains.

Yeah. The right time to exercise when a company is filing is like...a few years before, when the shares were pretty much imaginary and you weren't standing to be taxed for imaginary wealth (why I once agonized over buying 25 cent shares for 700 bucks in a company 4 years away from an IPO, I have no idea--it's either lost money or free cash. Assume it's lost money and you're either right or happily surprised a few yea…

I'll be ready for that next time. I never had access to the cheap options (since I came to the company after they'd had series C funding.

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

#190

Post by pfarrell »

mjs00 wrote: post #166
jen_h wrote: post #149

Earlier quoted context omitted.

Yeah. The right time to exercise when a company is filing is like...a few years before, when the shares were pretty much imaginary and you weren't standing to be taxed for imaginary wealth (why I once agonized over buying 25 cent shares for 700 bucks in a company 4 years away from an IPO, I have no idea--it's either lost money or free cash. Assume it's lost money and you're either right or happily surprised a few yea…

You may net less (or much less) a year from now waiting for long term federal tax rates vs selling now - if the stock price falls rather than remaining flat/rising.

I've come to the realization that you're right, jen_h and mjs00. I'll likely be doing the cashless transaction (if offered). Basically, I didn't play this one as well as I could have and am trying to find a way to recoup now. I think it's a bit late and I should take whatever's on the table when the lockout ends (assuming there's something left)
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