Comment by neilv
15 hours ago
> Typically just enough goes towards the share purchase to make investors happy, and the rest is structured as incentives for founders and key execs with milestone payouts.
So they're getting the employees' shares without compensating the employees?
And there's incentives paid to the people who approved the deal, separate from their shares?
(I've heard of liquidation preferences, but never by the person making a job offer with stock options. Bribery also never came up.)
Yes, and yes. The sibling comment here about liquidation preferences is correct, and these separate incentives are usually structured as retention incentives — eg, compensation for future work with the acquiring company.
Shareholders are of course free to sue the board for acting outside of the interests of the shareholders overall, but this happens very rarely because typically the company would otherwise be shutting down and it’s very hard to make the argument that the deal undervalues common shareholders’ shares.
Because “shares” are not all the same. Preferred vs common, so unless you negotiated some kind of preferred share terms, assume your shares are worthless. For a non publicly listed company. For a publicly listed company, the details are all publicly available, so the different types of shares will have their different prices be easily available to see.
If that's true, when a startup is making you an offer for ISOs of common shares, and explaining it... how likely are they to know that, in event of a successful exit for the startup, your shares would be diluted and preferenced to 0 value?
(The two most recent offer equity components I accepted were "2%" and "a million shares". On the latter, an upper exec did a kind of deal-closer meeting for their offer, showing me a spreadsheet, estimating how much the options would be worth if there were an exit in X years at $Y valuation.)
> If that's true, when a startup is making you an offer for ISOs of common shares, and explaining it... how likely are they to know that, in event of a successful exit for the startup, your shares would be diluted and preferenced to 0 value?
If they have any experience, or even just browse a forum like this, they should be 100% likely to know. The person on the opposite side of the negotiating table has a goal of giving you as little as possible in exchange for your work (and vice versa).