What questions (specifically) should have this person asked upfront when having their options offer prior to employment?
What should have they asked long the way to check on when there were fundraising rounds?
My company sold for $100M and I got zilch – how can that be?
81–90 of 391 posts
Re: My company sold for $100M and I got zilch – how can that be?
#82I feel for you.
I don't know how old you are, but my guess is that you are young, and you get another shot. Don't be dismayed. Try again.
$100M is an awful lot of money - I'd consider $1M to be a lot. I I understand that you got zilch, and if I were you, I'd be angry too. But you seem to be clever - get over it, and have another go.
/me just another employee. Never been an entrepreneur. Not smart enough.
Re: My company sold for $100M and I got zilch – how can that be?
#83Liquidation Preference. In very simple terms: "Liquidation Preference" is an agreement between a company and an investor that when the company is acquired or IPOs, the company will pay the investor some specific amount of money BEFORE any other shareholders get paid. If the company negotiated the funding well, the liquidation preference might be 1x (basically saying the company promises to pay back, in full, the inve…
It always baffles me when the top comment isn't discussing the article, but provides a response to the headline as if the article doesn't even exist.
The clickbait title was what got me to this page, so why not? :)
Re: My company sold for $100M and I got zilch – how can that be?
#84Is there a benefit in asking to get "paid" in both preferred stock and regular stock to spread the risk out? It seems "preferred" stock is really "preferred but with lots of dangerous caveats" stock.
Re: My company sold for $100M and I got zilch – how can that be?
#85Liquidation Preference. In very simple terms: "Liquidation Preference" is an agreement between a company and an investor that when the company is acquired or IPOs, the company will pay the investor some specific amount of money BEFORE any other shareholders get paid. If the company negotiated the funding well, the liquidation preference might be 1x (basically saying the company promises to pay back, in full, the inve…
It always baffles me when the top comment isn't discussing the article, but provides a response to the headline as if the article doesn't even exist.
You mean the linked article isn't just a 750-word essay version of "Huh?!?!"
Re: My company sold for $100M and I got zilch – how can that be?
#86I have found that in job negotiations, many startup founders are highly reluctant to discuss what the value of their stock option grant is worth, much less what other conditions may impact the payout. Has anyone else had this experience and what do they advise others to do when faced with the dilemma of turning down an offer due to a lack of transparency into the option grant?
Yep very little transparency. Ask these questions!! Don’t take the job? Take another job? Hope that the company will IPO? Or that an IPO is the path?
Re: My company sold for $100M and I got zilch – how can that be?
#87Liquidation Preference. In very simple terms: "Liquidation Preference" is an agreement between a company and an investor that when the company is acquired or IPOs, the company will pay the investor some specific amount of money BEFORE any other shareholders get paid. If the company negotiated the funding well, the liquidation preference might be 1x (basically saying the company promises to pay back, in full, the inve…
It always baffles me when the top comment isn't discussing the article, but provides a response to the headline as if the article doesn't even exist.
It saves a click for many people who are tired of clickbait.
Re: My company sold for $100M and I got zilch – how can that be?
#88A lot of words to say something very simple - information asymmetry via contractual complexity is being abused to profit those writing the contracts.
What information asymmetry? Liquidation preferences are perfectly fair, and not at all a mystery. Especially in the year 2019 when there has been an enormous amount written about them on the internet.
The parasites writing these contracts are counting on people not taking the time to become experts in shady startup contracts. As evidenced by this article, it's working.
Re: My company sold for $100M and I got zilch – how can that be?
#89I have found that in job negotiations, many startup founders are highly reluctant to discuss what the value of their stock option grant is worth, much less what other conditions may impact the payout. Has anyone else had this experience and what do they advise others to do when faced with the dilemma of turning down an offer due to a lack of transparency into the option grant?
This is actually a great heuristic.
Good founders (and companies) will be very transparent about how all this stuff works.
Bad founders (and companies) will not.
If a company that is trying to recruit you is squirrely about this stuff, it's definitely a vote in the direction of walking away.
Re: My company sold for $100M and I got zilch – how can that be?
#90I feel like legal manipulation is very bad for the startup ecosystem. Even here, at the YC forums, people assume their startup equity is worth $0 and advise you to go with a FAANG (or day that they broke even with friends at faangs after their exits). How is a legitimate startup supposed to recruit the best people under these conditions?
The entire point of joining a start-up is to 'play the lotto'. You are deferring salary now for a chance at millions later. You would not do it if the expected value was negative[0]. However, it's becoming more and more obvious to even freshmen undergrads that it's all a load of hooey.
Not only are the founders going to need to be super transparent with their finances to get good interviewees, but some other event will need to take place in addition [1]. That makes hiring good employees even more difficult, especially as the company grows.
This behavior by the current unicorns can be overcome, but man will it take a change in the funding ecosystem. Since the current crop already has two unicorns (Uber, Wework) with major funding rounds by a shady group (the Saudis), I really doubt the ecosystem will change for the better of prospective employees.
Like it or not, the wild west phase of tech is over. It is better to join up with the FAANGs at this point for most folks. The expected value of joining a start-up is unlikely to be positive.
[0] Yes, there is a sucker born every minute, but in general, that's the idea.
[1] Events like the prospective employee will require really good healthcare that only this company provides, or the prospective employee really really needs a job for some reason, or the prospective employee lives 5 minutes away, or the prospective employee really is super passionate about the idea, or the prospective employee is a good friend of the founders, etc. Each prospective employee you hire is also unlikely to share any of these events with any other prospective employee, and these events are likely to change over time.