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Ask HN: My startup has concealed from me that it raised funding. What to do?

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Re: Ask HN: My startup has concealed from me that it raised funding. What to do?

#61

Post by geoelectric »

dragonwriter wrote: post #46
CPLX wrote: post #37

Earlier quoted context omitted.

> in the US, you only get taxed when you sell the shares That's not quite correct with regards to US tax law at least. You can get taxed on the spread between the price you pay and the "fair market value" of the shares received. It's quite possible to get nailed with an insane tax bill in situations like this. You can end up in a situation where a company raises money at high valuations, and that spread is high, gene…

> leading to a horror story of being taxed on a percentage of the millions of dollars you supposedly got but never realized a dime from. If the shares a complete loss and liquidated that way, you also have a capital loss for the millions of dollars which can be applied against income for tax purposes; this may end up somewhat less than offsetting the tax bill depending on your other income because of tax rates; you d…

In the US, at least, the problem is that you realize the gain in a single tax year, but there's a limit on capital loss writeoffs so you have to spread that over a multi-year rollover. It doesn't balance.

Also, we have AMT (alternative minimum tax) which gets triggered by this kind of scenario--exercise and hold--and really ends up screwing you due to outdated but not updated calculations that assume anyone making over 150k or so is "rich".

Re: Ask HN: My startup has concealed from me that it raised funding. What to do?

#62

Post by spiritplumber »

Group everyone involved into a room, stand in front of the only exit, and calmly announce that nobody gets out until you receive an explanation. State the facts neutrally as you know them, and ask if they are accurate.

Actually let people out once they have explained. There is no reason to start kicking ass until you have a complete picture.

Once you have a complete picture, decide whether it's time to start kicking ass, and by what method.

Re: Ask HN: My startup has concealed from me that it raised funding. What to do?

#64

Post by smt88 »

aantix wrote: post #55
CPLX wrote: post #34

Well despite the fact that this is very stressful, I would start with the maxim that one should employ Hanlon's Razor[0] and not ascribe to malice what can adequately be explained by stupidity. It's quite possible, nee probable, that they are just disorganized and genuinely thought you already knew, or that it didn't matter, or otherwise were clueless or inexperienced enough to not really understand what had happened…

OP should consider this a good lesson (and one that I learned going through an acquisition); unless you're a founder, you cannot control "the deal". Unless you're in the room when the chips are (re)divvied up, you have to trust someone else to advocate for you. And after tolling away for a few years, trading your life for the promise of a better future through being acquired, ultimately you end up in a shitty positio…

> and try and blow up the deal or company

Never do that. Not only does it create bad blood, which could only be bad for you in the long run, it may also leave you open to a lawsuit.

The business world is often about shoveling shit. People who always get their revenge tend to have no friends and lots of burned bridges.

Re: Ask HN: My startup has concealed from me that it raised funding. What to do?

#65

Post by ChuckMcM »

So if it went down exactly as you said, you can relax, you don't have to worry about any extra bills to pay.

Two things that are important here are that the "official" valuation of the stock is what company counsel said it was, and if they had changed the valuation of the stock, unless there is only 'preferred' stock (unlikely) your common (likely) stock hasn't changed value at all.

When you did the last stock exercise if the CEO mislead you on the price it is their problem not yours.

Finally, and this is really really important, when you are not publicly traded the stock can be worth anything you say it is worth. The 409a process is one which allows the company to have a way of valuing the common stock but it doesn't come into play, generally until you have enough investors to make the calculation significant.

Re: Ask HN: My startup has concealed from me that it raised funding. What to do?

#66

Post by 3pt14159 »

I can give you a good recommendation for a lawyer that I've used in the past. I don't want to post his name here, since the primary reason I like him is that he doesn't over-bill or charge too much, but his work is pretty good. The way he does this is by refusing to meet in person or other time wasters like random coffees. Other lawyers are better for networking, but if you just need startup related paperwork done email me (even anonymously) and I'll do an introduction.

He works out of Toronto.

Re: Ask HN: My startup has concealed from me that it raised funding. What to do?

#67

Post by [deleted] »

spiritplumber wrote: post #62

Group everyone involved into a room, stand in front of the only exit, and calmly announce that nobody gets out until you receive an explanation. State the facts neutrally as you know them, and ask if they are accurate. Actually let people out once they have explained. There is no reason to start kicking ass until you have a complete picture. Once you have a complete picture, decide whether it's time to start kicking…

[deleted]

Re: Ask HN: My startup has concealed from me that it raised funding. What to do?

#68

Post by misterbwong »

Wow. I know nothing about investment, VC's, convertible notes, etc...but the one thing I DO know is that if you're THIS hesitant to talk to your co-founders about company issues, your partnership is in trouble. Communication is key and asking HN about it is not going to help. Why even consider lawyering up when you're going on rumors and hearsay and haven't even given them the chance to explain?

Re: Ask HN: My startup has concealed from me that it raised funding. What to do?

#70

Post by [deleted] »

smt88 wrote: post #64
aantix wrote: post #55

Earlier quoted context omitted.

OP should consider this a good lesson (and one that I learned going through an acquisition); unless you're a founder, you cannot control "the deal". Unless you're in the room when the chips are (re)divvied up, you have to trust someone else to advocate for you. And after tolling away for a few years, trading your life for the promise of a better future through being acquired, ultimately you end up in a shitty positio…

> and try and blow up the deal or company Never do that. Not only does it create bad blood, which could only be bad for you in the long run, it may also leave you open to a lawsuit. The business world is often about shoveling shit. People who always get their revenge tend to have no friends and lots of burned bridges.

[deleted]
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