I'd suggest talking to the cofounders in a non-accusatory manner. Startups are often disorganized and crazy and my guess is that the tax implications of your shares didn't even cross their minds because there are so many things going on. Also, what was the previous investment amount? If the previous investment is from a family or friend, my guess is that it's more of a bridge than an investment to keep the company afloat until true investment comes in (not enough to raise salaries). Either way, I'd give them the benefit of the doubt and not jump to conclusions too early before talking to them.
Ask HN: My startup has concealed from me that it raised funding. What to do?
81–90 of 117 posts
Re: Ask HN: My startup has concealed from me that it raised funding. What to do?
#82Earlier 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.
>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.
Don't buy this fud. There's nothing illegal about walking away from a shitty deal. Whatever your motives just plainly state "this deal no longer makes sense for me".
If you're a great engineer, then have some self respect, and walk away from a shitty deal. Go somewhere else where they respect the people that build value.
And if you aren't a great engineer, you weren't going to get anything anyways, so go somewhere that will raise your game and better positions you for the future.
>People who always get their revenge tend to have no friends and lots of burned bridges
There's a big difference between being bitter on a daily basis vs coming to terms with your past three years that are basically only going to net you an extra 100K (which you could easily get hustling in a few months consulting in SV).
Think deliberately about what you're toiling away for. An extra 20K? An extra 100K? REALLY? All the extra weekends for years is worth that? Get mad at yourself. Demand more. And if they deny you, walk, and position yourself better next time.
Re: Ask HN: My startup has concealed from me that it raised funding. What to do?
#83Earlier 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.
aantix: "Don't buy this fud"
I think that smt88 was referring to trying to blow up the company, which I agree is bad juju.
That doesn't mean OP shouldn't walk (as fast as possible) out of there if he or she isn't taken care of.
Re: Ask HN: My startup has concealed from me that it raised funding. What to do?
#84How do you conceal that in a small venture?
Sounds like you have a real communication problem in that company if something like this can happen and nobody has a clue.
Re: Ask HN: My startup has concealed from me that it raised funding. What to do?
#85Earlier quoted context omitted.
> 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.
aantix: "Don't buy this fud" I think that smt88 was referring to trying to blow up the company, which I agree is bad juju. That doesn't mean OP shouldn't walk (as fast as possible) out of there if he or she isn't taken care of.
>blow up the company
I meant this in the context of you're a critical engineer, and by leaving, you leave the company handicapped. You're critical to their success, but yet you don't feel like they're looking out for you. Walk.
Re: Ask HN: My startup has concealed from me that it raised funding. What to do?
#86Earlier 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.
> People who always get their revenge tend to have no friends and lots of burned bridges.
Walking away from a bad deal isn't about getting revenge, it's about looking out for yourself (because no one else is).
Re: Ask HN: My startup has concealed from me that it raised funding. What to do?
#87This might not be true in Canada, but in the States when investors buy preferred shares with a liquidation preference (even 1x non-participating) the common share valuation can still be quite low, even possibly still PAR. It's called a 'thin common' valuation strategy.
The general idea is, what is the value an investor would have paid without any of the additional rights granted by the preferred shares? Usually for early stage startups the answer is reasonably close to "$0" -- the deal would never happen without the preference. The common shares are often still worthless, in reality and for tax purposes as well, after a Series AA and sometimes even after Series A.
Re: Ask HN: My startup has concealed from me that it raised funding. What to do?
#88You shouldn't be in bad shape tax-wise. I don't know Canadian tax law - but in the US, you only get taxed when you sell the shares. Capital gains would not be recognized if you exercised the options and held onto the shares. Since you have been exercising your options - you are a shareholder in the company (or a member depending on the structure) and I would imagine that the company's operating agreement would requir…
"but in the US, you only get taxed when you sell the shares. Capital gains would not be recognized if you exercised the options and held onto the shares."
In the US this is a completely false statement.
As the FMV increases of your exercised options, you are responsible for paying taxes at the /time of exercise/ between the strike price and the FMV of that stock.
Once you pay those taxes, you do not need to continue to pay taxes as the FMV increases. The reason you pay at exercise is because you are exercising options that are already "in the money" even though you obviously have not yet realized that actual gain since you didn't sell the stock.
Sucks, but it's the way it is.
Re: Ask HN: My startup has concealed from me that it raised funding. What to do?
#89Earlier quoted context omitted.
> 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.
>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. Don't buy this fud. There's nothing illegal about walking away from a shitty deal. Whatever your motives just plainly state "this deal no longer makes sense for me". If you're a great engineer, then have some self respect, and walk away from a shitty deal. Go somewhere else where they respect…
First, I was against doing intentional harm. I absolutely think s/he should walk away, but making enemies doesn't solve any problems and certainly could create some.
Second, you seem not to understand the difference between "breaking the law" and "getting sued". Intentionally screwing over a company can be both legal and lead to a lawsuit that you end up losing.
Re: Ask HN: My startup has concealed from me that it raised funding. What to do?
#90Earlier quoted context omitted.
> 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.
>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. Don't buy this fud. There's nothing illegal about walking away from a shitty deal. Whatever your motives just plainly state "this deal no longer makes sense for me". If you're a great engineer, then have some self respect, and walk away from a shitty deal. Go somewhere else where they respect…
Walking away from a deal is one thing - deliberate harm is something else.
At one point I was at a company that had built a web product for another company. The external party decided they weren't going to pay their bill, and at the time we'd been covering the cost of hosting several of their servers for months. Obviously our first reaction was that we'd just turn them off but our lawyers told us in no uncertain terms that we couldn't. It would be obstruction of business and we would definitely be found to be in the wrong. (This was in the uk)