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Startup Stock Options – Why a Good Deal Has Gone Bad

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Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#221

Post by stingraycharles »

deanmoriarty wrote: post #215
xrd wrote: post #212

Earlier quoted context omitted.

This is what startups pay a lawyer to do. It's not that hard: restructure the company ownership in a long document with complicated terms. Get the employee to sign it and voila, early employees are screwed. The only real response is just not signing, but they will tell you the company will die if you don't do it, and you probably will just take it rather than fighting. At least I did.

But signing something without not understanding it is too naive. So, assume I already left the company and exercised a big bag of common options and so I have a decent amount of common shares. If they tell me to sign something that looks shady I just say: "No, it looks shady". What then, can they do?

Send to lawyer's office to pressure you.

It doesn't take a lot of imagination to see that this can happen. People are generally naive, and there are just a few that will resist and fight.

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#222

Post by dalbasal »

wbl wrote: post #201
dalbasal wrote: post #154

Earlier quoted context omitted.

If early liquidity wasn't an option for founders, this massive pre-ipo/private-ipo market wouldn't exist. Without early liquidity, a pre-ipo zuck/kalanick/etc. would be a paper billionaire with $0 in the bank and >$1bn "invested" in a risky tech startup. That's not financially or mentally sound, even by their risk lovin standards. If investors demanded every penny go towards growing the business, those CEOs would jus…

Going to IPO doesn't mean investors can't invest.

It means they have more competition.

It also means the way the company operates is different. Public markets don't allow (at least they're currently extremely intolerant of) high risk-reward strategies in practice, or cultural weirdnesses.. especially in a major stock. See: Tesla's issues, contrasted with spaceX's "must not be listed if we want to go to mars" stuff.

So, in practice, buying 2015-ipo Uber stock is a different investment to what Uber investments actually were.

Also (possibly the real factor) it goes through different channels. VCs and PEs business is investing people's money in investments they can't just buy on an app.

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#223

Post by defen »

opportune wrote: post #202
defen wrote: post #186

Earlier quoted context omitted.

I was using the numbers here: https://www.nerdwallet.com/blog/loans/total-cost-owning-car/ but you could certainly get it down a bit if you don't mind driving an older car.

15k miles a year is also a lot of miles. I probably drive less than 5k.

Berkeley -> Mountain View is 50 miles one way (25,000 per year)

Berkeley -> San Mateo is 35 miles one way (17,500 per year)

Berkeley -> San Francisco is 15 miles one way - 7500 per year (at an average speed of 20 mph)

If you can use BART or CalTrain to get to work then you can get those numbers way down, but it's not an option for everyone.

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#224

Post by [deleted] »

deanmoriarty wrote: post #215
xrd wrote: post #212

Earlier quoted context omitted.

This is what startups pay a lawyer to do. It's not that hard: restructure the company ownership in a long document with complicated terms. Get the employee to sign it and voila, early employees are screwed. The only real response is just not signing, but they will tell you the company will die if you don't do it, and you probably will just take it rather than fighting. At least I did.

But signing something without not understanding it is too naive. So, assume I already left the company and exercised a big bag of common options and so I have a decent amount of common shares. If they tell me to sign something that looks shady I just say: "No, it looks shady". What then, can they do?

[deleted]

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#225

Post by dalbasal »

steveklabnik wrote: post #209
dwaltrip wrote: post #200

Earlier quoted context omitted.

Why do investors want to delay an IPO?

From the article: Suster points out that the longer the company stays private, the more valuable it becomes. And if during this time VC’s can hold onto their pro-rata (fancy word for what percentage of the startup they own), they can make a ton more money. The premise of Growth capital is that if that by staying private longer, all the growth upside that went to the public markets (Wall Street) could instead be made…

I think the implication of the question may have been "why not just hold the stock after the IPO if you expect.

Further down, continuing the Sister quote:

three examples Suster uses – Salesforce, Google and Amazon – show how much more valuable the companies were after their IPOs. Before these three went public, they weren’t unicorns – that is their market cap was less than a billion dollars. Twelve years later, Salesforce’s market cap was $18 billion, Google’s was $162 billion, and Amazon’s was $17 billion.

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#226

Post by kingnothing »

halfnibble wrote: post #218
orthecreedence wrote: post #182

Earlier quoted context omitted.

You're being downvoted, but I agree. I worked at a BigCorp and it was one of the worst years of my life. The work/life balance was awful, and the pay was shit compared to the hours I put in and satisfaction I got out of the job. All other experiences I've had have been much more satisfying. On top of this, people think BigCorp is a safe bet where a startup is not, but BigCorp lays people off in large swaths all the t…

Can someone tell me what letter "BigCorp" starts with? I'm scared because I'm looking at a job at a big corp., but I was under the impression that I could leave the office at 5pm.

I've worked at Uber and Salesforce, and put in very normal hours at both. 8 hour days were standard for devs.

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#227

Post by bilbo0s »

xrd wrote: post #212
deanmoriarty wrote: post #196

Earlier quoted context omitted.

I would be really curious if someone could shed some light on how a healthy company could simply decide to "extinguish" exercised shares. Like how exactly would they go about doing that, and do you have examples I can read up describing where and how this happened? I would understand if that happened when the company is in trouble (e.g. valuation dropping below the last preferred valuation, so preferences kick in, or…

This is what startups pay a lawyer to do. It's not that hard: restructure the company ownership in a long document with complicated terms. Get the employee to sign it and voila, early employees are screwed. The only real response is just not signing, but they will tell you the company will die if you don't do it, and you probably will just take it rather than fighting. At least I did.

Oftentimes, the conversation is more like, "Sign this or we're shutting down and starting a new company."

But yeah. It does go down that way more often than many people know.

In fairness though, one thing I think a lot of people don't realize is that someone must've gone to bat for employees when documents like that show up. I can pretty much guarantee you that the greedy bastards in the room wanted to shut down, or layoff, and reorganize with just the employees that they needed.

Someone in the room had to say, "Hey guys, let's try this!" And that someone took a real risk at being seen as "not a team player" so to speak. (It was likely someone powerful. What I've seen is that it can be everything from a powerful VC of the religious variety, all the way to your more idealistic founder types.)

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#228

Post by breischl »

kabdib wrote: post #183

I made a bunch of money from ISOs at large, established companies. I made zero (well, negative, really) from startup stock options, even before things got really shifty in the 2000s. One startup that I left, that is now a billion dollar company, simply decided to "extinguish" the shares I bought a few years after I resigned. I was probably cheated, but it's not worth the effort to go after them and they know it. Trea…

I had a former employer do something different but similar.

They sold all the products to another company, paid all of the proceeds out as a bonus to the execs and big investors, and left the holders of the common stock (ie, employees who had bought their options) with a worthless, empty shell. Thanks for working hard and buying shares in the company!

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#229

Post by ryanSrich »

drstewart wrote: post #214
ryanSrich wrote: post #152

Earlier quoted context omitted.

> Work / life balance Disagree here for one specific type of startup...remote (which I know you mentioned). Here's an example day at BigCorp: - Rise and shine at 5am to work out early enough - Leave the house by 7am - 1+ hour commute into work - Start work at 8am - Stay until 8pm - Get on/in the car, train, bus for a 1+ hour commute home - Late dinner around 9pm - Veg out because you're exhausted and go to bed by 11p…

What an absolutely ridiculous strawman. Anyone can come up with lopsided scenarios to make one seem better than the other. Here's an example day at BigCorp: - Rise at 9am because standup isn't until 10am - 10 minute commute since you're paid well enough to live near the office - Arrive at work at 10am - 1 hour lunch break at 12pm - Leave work early at 4pm to miss the gym rush - Get home by 6pm, enjoy the rest of the…

I don't see the argument here. Strawman or not, the case I made is fairly common (ask around). The case you made is not.

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#230

Post by kayoone »

666lumberjack wrote: post #175
jessaustin wrote: post #132

Earlier quoted context omitted.

I'm pretty certain I've heard Amazon described as "evil". Apple are less objectionable, but I'm sure there are some things that some body wouldn't like.

Most plausibly their: - Attitude to third party repair - Puritanical content restrictions - Apparent disdain, in many cases, for their 'power users'

not really on the same level of "evil" as people perceive FB, GOOG, Amazon etc
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