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I'm getting screwed with my stock options

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Re: I'm getting screwed with my stock options

#71

Post by mncolinlee »

Sounds like an awful position. I was in a similar place recently. I was second or third engineer (depends if you count a contractor) in a very successful startup when I found that my equity wasn't as promised. I pretty easily found a job where I'd likely make more as cash even if the startup gets acquired for $500 million. You shouldn't tie yourself to a situation where empty promises are all you're working for. I know exactly how it sucks to move on from something you built.

Obviously, you could just propose an equal dilution of everybody in the pool. Or come to them with an outside offer and see what happens.

Re: I'm getting screwed with my stock options

#72

Post by dollar »

Your partners either a) know what they are asking you to do is unfair and are asking you anyway, in which case they are assholes, or b) don't know what they are asking you to do is unfair, in which case they are idiots. This is a no-win situation, time to cut your losses and move on as quickly as possible.

Re: I'm getting screwed with my stock options

#73

Post by encoderer »

Silhouette wrote: post #47
encoderer wrote: post #39

Earlier 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.

A 4% starting offer isn't unreasonable. ::boggle:: From the description given, it sounds like there are two suits running the show with control of the business and the overwhelming majority of the financial interest. I'm assuming from context that the OP is the technical guy who dug the cofounders out of a mess when their initial outsourced product development was not of an adequate standard, and did so in return for…

> I'm assuming from context that the OP is the technical guy who dug the cofounders out of a mess when their initial outsourced product development was not of an adequate standard, and did so in return for only a 10% stake and poor immediate compensation

I'm making fewer assumptions.

And more importantly, I've learned that in a negotiation, being "insulted" by the first offer doesn't help me in negotiating an ultimate agreement. I think a counter-offer will get you a lot further than righteous indignation.

Re: I'm getting screwed with my stock options

#74

Post by incanus77 »

incanus77 wrote: post #11

Are your options on paper? Lawyer is a good idea, and even if you have any informal documentation like emails you should be in decent shape, but having this hard on paper is the only way to be sure. In the absence of an anti-dilution clause, the wording of however you acquired your 10% will help to define the intent and whether you can actually resist the dilution. If you feel there is a lot of potential in the stock…

In light of some of the lawyer-equals-adversarial comments above, I should clarify: definitely don't tackle your partners with a lawyer. What I'm suggesting is hire a lawyer you like / you get through a trusted recommendation to read things from your point of view, then give you advice at the present time.

A good lawyer will present things as they stand, but also let you know where the line exists between asking for what is fair and pressing your case more strongly / becoming more adversarial. They will leave the choices to you, but they will inform you well of the spectrum of choices that you have.

Re: I'm getting screwed with my stock options

#75

Post by [deleted] »

swang wrote: post #41
tptacek wrote: post #32

Be careful executing your options if you don't trust the company. Execution might not substantially improve your rights as a shareholder. It will, on the other hand, involve you surrendering your own cash. There are startup horror stories of early employees executing and getting zeroed out at acquisition. (I say this as someone who listened to those horror stories, refused to execute options, and lost a low six figur…

Can you explain more about how they can screw you over when they get acquired?

[deleted]

Re: I'm getting screwed with my stock options

#76

Post by Silhouette »

encoderer wrote: post #73
Silhouette wrote: post #47

Earlier quoted context omitted.

A 4% starting offer isn't unreasonable. ::boggle:: From the description given, it sounds like there are two suits running the show with control of the business and the overwhelming majority of the financial interest. I'm assuming from context that the OP is the technical guy who dug the cofounders out of a mess when their initial outsourced product development was not of an adequate standard, and did so in return for…

> I'm assuming from context that the OP is the technical guy who dug the cofounders out of a mess when their initial outsourced product development was not of an adequate standard, and did so in return for only a 10% stake and poor immediate compensation I'm making fewer assumptions. And more importantly, I've learned that in a negotiation, being "insulted" by the first offer doesn't help me in negotiating an ultimat…

The opening offer reveals that the other parties are either naive or trying to take the OP for a ride. Either way, they've probably already forfeited any benefit of the doubt they might otherwise have deserved in negotiations.

That's not righteous indignation, it's just knowing who is sitting on the other side of the table when you're negotiating, and hopefully ensuring that you protect yourself accordingly in any final deal you agree on.

Re: I'm getting screwed with my stock options

#77

Post by Silhouette »

icebraining wrote: post #62
tptacek wrote: post #35

Earlier quoted context omitted.

Saying that may make you feel better, but Tony seems to have the better argument. You absolutely can be fired for lawyering up what the founders intended to be a pro-forma restructuring of the shares. You will probably have no recourse when that happens. Assuming you're vesting, like most employees (and founders!) are, getting fired will cost most of your shares. Talking to a lawyer: good. Bringing a lawyer into the…

I'm not saying that bringing a lawyer at this point is a good (or bad) decision, I have no idea. But can they really fire him? If OP is in an EU country and they've setup an office there, aren't they under the jurisdiction of said country for employment purposes? If so, it might not be so easy. I don't know labor law across the EU, but here our labor courts don't like companies who fire people for exercising their ri…

I don't know labor law across the EU, but here our labor courts don't like companies who fire people for exercising their rights.

That is certainly the general attitude around Europe, encoded in law to various degrees depending on where you are.

However, it's worth keeping in mind that most of those laws are meant to protect the little guy from being fired unreasonably and winding up with no income but still rent to pay.

The maximum levels of compensation available for wrongful dismissal tend to be relatively low compared to the levels you're talking about as a founder/early employee/investor in a company that becomes successful. It seems to be implicitly assumed that anyone dealing with bigger numbers will know enough to make suitable contractual arrangements that protect their own position explicitly.

Re: I'm getting screwed with my stock options

#78

Post by mrinterweb »

If an employee owned 4% of the options, would they have to give up 100%? This simply sounds like they are not doing their math right. Obviously, the plan that they proposed benefits them, but propose to them what would be fair based on diluting options by percentage equally. If they want to extend the option pool, the same percentage should be taken out of all option holders.

Re: I'm getting screwed with my stock options

#79

Post by darkmighty »

7Figures2Commas wrote: post #64
patio11 wrote: post #7

How about "I appreciate your desire to have more stock available to give new hires. You've proposed that I give up 4%, which is 40% of my allocation. I'm amenable to giving up 1%, which is 10% of my allocation and equal to the portion which you're willing to give up, and lets us bring in a whole new engineer." If they counter offered, I might give up another 0.5% in return for "OK, you guys can have 1.5%, but in retu…

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.

Re: I'm getting screwed with my stock options

#80

Post by georgeecollins »

Get a lawyer to look at your past agreements. As others have mentioned, there should be nothing adversarial about hiring a lawyer to look at your agreeements and advise you of your rights and obligations. You need a lawyer to tell you when you can exercise stock. Don't get legal advice from a forum.

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 the investors may ultimately be the most lucrative option for you.

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