21–30 of 88 posts
Have you, you know, TALKED TO THE REST of the founders? I don't think they are out to get you and in the process distract the startup or get terrible press. Seems people here are talking about lawyering up too fast, without knowing whether a proportional dilution has even been discussed.
I'm not familiar with EU tax rates on short term capital gains in a US market, and would highly recommend spending some of the money you might have spent on a lawyer talking to a reputable financial accountant from your country with experience in this area. In the US you have to set aside a chunk of the proceeds if you do a same day sale when you exercise your options, and are frequently penalized by your state if you don't give them their share at the end of that financial quarter.
There's a lot going on there and I don't think HN is going to give you complete enough advice to rest your mind.
Assume positive intent. They might not be out to fuck you -- they might just not have thought about it from your perspective. Let them know that you think it's unfair because you're diluting much more than them proportionately. Help them understand that you're in this for the long run (even if you're not sure, founders want to hear that: stability in senior team is something they value) and you want to be incentivise…
Hmm. You could assume intentions, but since you don't know their intentions, it shouldn't affect your decisions much.
Get on a call with them ASAP. Tell them you think that pro-rata is both what's FAIR and WHAT IS DONE 99.999% of the time in these circumstances-- and mention that you've done a lot of research. Say, "Guys, obviously any two of us can impose a decision on the third, but I trust you guys, so I'm assuming you're doing this because you think it's normal/fair. How about this: I pay for a few hours of a high-end startup lawyer's time and we can get a sense of what's standard-operation-procedure here is? It seems like we might have different opinions about what's fair. I'd propose we appeal to a knowledgeable 3rd party. Is that cool?" If they agree, add: "If this experienced startup lawyer says that pro-rata is what's done virtually all the time in these circumstances, can we agree to go that route?" And see what they say. Just keep saying you trust them and ask questions along these lines. Eventually they'll either agree or it'll come out that they feel that you haven't earned your 10%.
Understand: If things get ugly, they can fire you (wait-- are you vesting? If they fire you after 1.5 years, you lose most of your options). Once they fire you, they can dilute you and other people who are not with the company somewhat easily. Your job here is to be friends and to maintain/earn trust (and to not get taken advantage of!). NEVER THREATEN until there's nothing left to salvage. If you're a fabulous negotiator, you can HINT that you're willing (and financially able) to lawyer up.
Assume positive intent. They might not be out to fuck you -- they might just not have thought about it from your perspective. Let them know that you think it's unfair because you're diluting much more than them proportionately. Help them understand that you're in this for the long run (even if you're not sure, founders want to hear that: stability in senior team is something they value) and you want to be incentivise…
Definitely talk to a lawyer, one who knows about startups. NOTE: the lawyers for your startups represent the company, so don't talk to them - find your own lawyer. Other than that, AFAIK what you mention is not typical. Option pool should not be created by "taking" options from employees, but rather by issuing new shares which dilutes everyone equally. You should bring it up and ask that they create the option pool b…
Do you actually have a contract for your ESOP? It's common to not have one in the early stages since they are expensive to create.
Maybe your founders don't really know what they are doing wrt to options - many don't.
You must have some sort of contract between yourself and the company or the founders. If there isn't a contract, or it's a bad one, then it becomes interesting from the standpoint of IP ownership. How your shares are tied to the IP ownership is what you want to concentrate on as it is your lever to get what you want. If you find the founders are being unreasonable, use any and all means to defend your dilution up to the point it equals an equitable dilution of all shares by all stake holders.
Don't make blaming statements to the founders, clearly state what you want for yourself in terms of ownership, then go get an attorney and have them look at the documentation. After they give you an opinion on it, prepare yourself for the worst outcome and then restate what you want for yourself again to the founders. If they don't agree, be prepared to make the hard decision.
Best of luck to you!
The instant your partners know you're involving a lawyer is when the relationship becomes adversarial (possibly permanently). This is not the lawyer moment. The lawyer moment is "after a lot of discussion, these guys refuse to do what me and the rest of the world thinks is fair". Has there been a lot of discussion? Get on a call with them ASAP. Tell them you think that pro-rata is both what's FAIR and WHAT IS DONE 99…
