When you know your legal situation, keep an open mind about what is best for you rather than what is "fair". If investors want to dilute you more than other founders, going along with wishes may ultimately be the most lucrative option for you.
I'm getting screwed with my stock options
81–88 of 88 posts
Re: I'm getting screwed with my stock options
#82What you're looking for is an anti-dilution clause. There may be one in the stock option agreement that prevents this. If not, whether they can do it is going to depend on the stock option agreement and the laws of the state where they are incorporated. I believe the best advice for you is to find a lawyer in the state where the company is incorporated and hire them. It sounds to me like you've already gotten a raw d…
On the other hand, it is standard advice in the venture-backed startup world to NEVER give an anti-dilution clause - I've heard the words "never give an anti-dilution clause to anyone unless they're God, and even then he'd better be giving you a term sheet worth its weight in gold." Unless you were aware of such a clause, it's unlikely that it's in there. At the end of the day, without a clause like that, the parties…
All of the "advice" I've seen from Venture Capitalists have been self serving rationalizations that almost never are really "standard" terms as much as they would like them to be.
For example, in one company I worked with, every employee had an anti-dilution clause. This didn't keep the VCs away.
Re: I'm getting screwed with my stock options
#83Shit happens. Refactoring options and shifting things around may suck, but it may have been a requirement of them getting the seed funding. 100% of your options at Zero worth are worse than N% (not a terrible N%) at an actual positive valuation. 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…
This is not the case where you can use 'shit happens' and write this off like it's not a big deal.
When you work mostly for options (which is already pretty much a scam) and receive little to no pay, this is not 'shit happens' this is 'I need to feed my self and my family' type of situation.
Re: I'm getting screwed with my stock options
#84Earlier quoted context omitted.
This is not sage advice. First, percentages are meaningless. The OP needs to quantify what's at stake in absolute terms. If he has justification to negotiate or otherwise take action to protect his interests, he should do so based on an understanding of the dollar amounts involved, not percentages. When you negotiate around percentages, it's very easy to win the negotiation but lose money. Second, the scenario descri…
It's not just present dollar amount, it's expected dollar amount, so percentages are quite important in case the has high expectations.
On this note, please recognize that figuring out what's at stake requires the OP to take an even bigger step back. The OP indicates that he was given a 10% equity stake in the company in the form of stock options when he was a contractor.
As a contractor, he would only be able to receive non-qualified stock options. The tax treatment of these is almost always less favorable to the recipient than incentive stock options, which can only be granted to employees. Now that the OP is an employee of the company, he may need to consider that the structure of his equity is sub-optimal. If there's justification for a negotiation here, the structure of the OP's equity could be just as important as equity amounts.
Further complicating matters is the OP's status, as it sounds like he's a nonresident alien. Cross-border tax issues can be very complicated and at a minimum, the OP should understand the implications of transactions involving his equity.
Bottom line: simply jumping into a negotiation over percentages is putting the cart way before the horse. The OP should seek the counsel of a qualified attorney and tax professional before he tries to address his concerns directly with the company.
Re: I'm getting screwed with my stock options
#85Earlier quoted context omitted.
Great advice. Always have acceptable alternatives in mind. For instance, propose that they accelerate vesting on your remaining options 50 cents on the dollar. So if they want you to give up 2% they would instantly vest 1%. The term here is "single trigger". Point being, be creative and try to work out a deal. A 4% starting offer isn't unreasonable.
He shouldn't be giving up any of his shares. At all. He should be demanding more options. In all likelihood - he's the reason the business exists. They would have nothing without him.
Re: I'm getting screwed with my stock options
#86Definitely 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…
Re: I'm getting screwed with my stock options
#87Earlier quoted context omitted.
Great advice. Always have acceptable alternatives in mind. For instance, propose that they accelerate vesting on your remaining options 50 cents on the dollar. So if they want you to give up 2% they would instantly vest 1%. The term here is "single trigger". Point being, be creative and try to work out a deal. A 4% starting offer isn't unreasonable.
It's totally unreasonable, even as a starting offer. These guys just signaled that they are not serious people.
BTW OP, did you get a signed agreement? were there any clauses that might be relevant to this?
Re: I'm getting screwed with my stock options
#88Earlier quoted context omitted.
The guy has no business trying to learn how to be a diplomat when he's already tasked with a day to day job for the founders. If it's gotten this far in the conversation (posting on HN) then the situation is clearly bad, at least on one end. Given it's a situation with unfair dilution, the assumption is that all stakeholders are well aware of the dilution results and are OK with what is being proposed. They are found…
I've had the opposite experience. I once was offered an unfair equity package from cofounders of a startup. I (and two others) wrote up a document voicing our unhappiness and the reasoning behind it. And they ended up agreeing with us. While the offer they first came up with was not fair to us, they honestly hadn't realized it (they had a lot on their minds, it was the first solution that came to them, and they simpl…