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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

#321

Post by jammygit »

breischl wrote: post #228
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!

What stops ordinary companies from doing this to ordinary shareholders?

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

#322

Post by AdamM12 »

seattle_spring wrote: post #303
MobileVet wrote: post #301

I was part of a very well know incubator and a very early employee at a flagship company. Founder blew tons of cash and dilutions but that is part of it and I didn’t mind. What was ethically shady was shortly after I left with 4yrs vested they decided to restructure the entire company so they could attract investment. They took all the debt from the original company and put that in a shell company that then owned a p…

A company I used to work for is in the process of doing this right now. Makes me feel really stupid spending ~10k exercising the shares.

I believe you should be able to write off a loss as cap gains or OID depending on how long after excise you liquidate. Will at least be able to get some back.

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

#323

Post by jammygit »

djakjxnanjak wrote: post #310
fj39dkf wrote: post #305

Earlier quoted context omitted.

Can you elaborate?

The world is at peril, and full of people who are suffering. I can easily call an oil company evil, because they are burning the earth. I can call a food manufacturer that knowingly puts poison in their products to save a few bucks evil. I cannot bring myself to call Facebook or Google evil because they are configuring computers to display ads that introduce people to products they might want to buy. It’s really a tr…

The harm these companies might cause is primarily in the future. This is still the sunny phase where they have not been incorporated into some Orwellian system (pardon me, google tried really hard in China but got stopped for now)

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

#324

Post by jammygit »

dnautics wrote: post #108
pnw_hazor wrote: post #103

Earlier quoted context omitted.

Though at F and G there is the cost of having to rationalize working for an organization that is evil.

Nobody ever said that about the As!!

Amazon warehouse employees had to pee in bottles because they were worked so hard, and there is that business about selling large scale facial recognition services to governments (possibly in emulation of what China is doing)

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

#325

Post by tarr11 »

deanmoriarty wrote: post #264
eanzenberg wrote: post #260

Earlier quoted context omitted.

>>FAANG-equivalent income of 400k LUL dude, I hear this shit being parroted ad-nauseum. The amount of FAANG people that hit this level or more is like, 5-10%. Take a look at the top 5-10% of non-FAANG companies and you'll see those employees are also hitting this mark. There's nothing special about FAANG. I understand lots of FAANG employees parrot this around to make themselves feel better about their life choices.

According to my experience (and again, that's the only thing I know), that's not even remotely true. When I interviewed a couple years ago, I made sure to interview at FAANG (specifically Facebook, Google, Netflix) and I also interviewed at half dozen big public companies in the same couple months (among which Oracle, Salesforce, Cisco, Juniper, Palo Alto Networks). I didn't interview at any private company (Uber, Ai…

How has your TC changed since you’ve joined Google?

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

#326

Post by kmavm »

dalbasal wrote: post #225
steveklabnik wrote: post #209

Earlier quoted context omitted.

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, Sales…

A lot of VC funds are required to liquidate and return proceeds to LPs in the event of an exit, whether through IPO or acquisition.

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

#327

Post by deanmoriarty »

tarr11 wrote: post #325
deanmoriarty wrote: post #264

Earlier quoted context omitted.

According to my experience (and again, that's the only thing I know), that's not even remotely true. When I interviewed a couple years ago, I made sure to interview at FAANG (specifically Facebook, Google, Netflix) and I also interviewed at half dozen big public companies in the same couple months (among which Oracle, Salesforce, Cisco, Juniper, Palo Alto Networks). I didn't interview at any private company (Uber, Ai…

How has your TC changed since you’ve joined Google?

The stock value has slightly increased over the past year or so, and have received some refreshers. Very happy with the compensation part. I don't have kids and am looking for an early retirement outside the US, so I'm able to stash away significant amount of savings every month.

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

#328

Post by village-idiot »

stingraycharles wrote: post #221
deanmoriarty wrote: post #215

Earlier quoted context omitted.

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.

Very few people also have their own lawyers, although pretty much everyone involved in a startup should have one.

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

#329

Post by habosa »

There are so many absolutely horrifying stories in this thread about startups deliberately restructuring to take money away from rank and file employees. Of all the reasons I've been told not to take startup stock, this one is new to me.

What can be done about this? At the very least can we name and shame?

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

#330

Post by sonnyblarney »

sonnyblarney wrote: post #297
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…

'Extinguishing' aside, there are ways to essentially devalue shares, simply by offering up a lot more, at a low price to current investors, thereby washing away the relative value of old shareholders. Once investors do this, they can take control of a company, and even issue new equity to current employees to keep them happy. This is a tricky thing in normal scenarios because obviously the shareholders getting wiped…

I should add that this happened to me as an employee of a fairly large telecom startup.

The common term is 'washout round' [1] and this practice is not entirely uncommon.

[1] https://www.investopedia.com/terms/w/washoutround.asp

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