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I don't always believe in scare quotes, but we probably ought to use them around "valuations" promoted by companies raising private capital. I own a tiny bit o

I don't always believe in scare quotes, but we probably ought to use them around "valuations" promoted by companies raising private capital. I own a tiny bit of common stock in a private company (by way of ESOs), and I have a hunch that virtually all of the rest of the stock is in preferred shares of some sort. And thus I have no idea how much my stake is worth. For all I know, it's zero.

boomzilla 11y ago
This is so true. What's concerning is that terms are usually confidential and not available to most employees (including the top technical contributors). Given the info on Square on Box, it seems we should expect the last round investors are guaranteed at least 20% return regardless of the exit valuation before everyone else gets a dip.
- icedchai 11y ago
  Yeah. I've asked for the terms and never got them. What are the preferences / rights / caps / etc. of the preferred stock holders? You can never get this information. Common stock holders are last in line. This information should be available for all stock and option holders, including employees.
  - ThrustVectoring 11y ago
    I'm willing to give the benefit of the doubt, so long as my position is a significantly smaller version of the founding team's. If there's a difference, I'm going to assume that my share is worth $0 until I can get cash-in-hand.
  - akg_67 11y ago
    By Law, if you already own the stock (not just the option), you can demand to see the financial information of the private company. A few years ago, there was a story about an ex-googler who demanded and received access to Google financial information while Google was still private.
    - icedchai 11y ago
      Unfortunately I only have options at the moment. Perhaps I should exercise some of them just to get the financial info?
      - toomuchtodo 11y ago
        Exercise 1 share? Not a lawyer or accountant, but the tax liability for one share should be minimal.
    - deleted 11y ago
      [deleted]
    - prostoalex 11y ago
      It's a very limited set of documents, like prepared quarterly and annual statements.
      - akg_67 11y ago
        I agree the information typically provided by the private companies is limited. But they offer insight into health of the company. The person reviewing these statements need to know how to analyze and reconcile financial statements. Also, as shareholder, you can ask their finance person to explain/elaborate certain items in the statements. Shareholders' Equity section of Balance Sheet statement and Cash Flow from Financing Activities section of Cash Flow statement might also give additional insights. Company will be accounting for value of preferred shares, any dividend/interest paid on preferred on these statements. I am not sure how much an employee can push without jeopardizing the job. IME, most owners and executives of such entities are typically egomaniacs who don't like being questioned unless someone has bigger stick than them. My personal experience is very limited and only as external investor.
        JonFish85 11y ago
        As an employee who left a company and purchased one share on the way out, I imagine I have nothing to lose? I wonder if I am entitled to this information.
tibbon 11y ago
Does anyone have tips as someone with ESOs how you can get a better idea of the value and your position, given preferred shares? I feel you never have as much diligence/information as an employee as a VC would who is investing in the company.
- JonFish85 11y ago
  You don't, and probably for a few reasons. An employee is not seen as being as important to the company as the people with many millions of dollars. "Open up your books or I won't come on board" won't make the company think twice about letting you leave. If a VC with $25m wants to look at the books, the company will at least think about it. On top of that, the people with millions of dollars can hire much better lawyers and such who can truly analyze a company a lot better than your average employee.

boomzilla 11y ago

This is so true. What's concerning is that terms are usually confidential and not available to most employees (including the top technical contributors). Given the info on Square on Box, it seems we should expect the last round investors are guaranteed at least 20% return regardless of the exit valuation before everyone else gets a dip.

icedchai 11y ago
Yeah. I've asked for the terms and never got them. What are the preferences / rights / caps / etc. of the preferred stock holders? You can never get this information. Common stock holders are last in line. This information should be available for all stock and option holders, including employees.
- ThrustVectoring 11y ago
  I'm willing to give the benefit of the doubt, so long as my position is a significantly smaller version of the founding team's. If there's a difference, I'm going to assume that my share is worth $0 until I can get cash-in-hand.
- akg_67 11y ago
  By Law, if you already own the stock (not just the option), you can demand to see the financial information of the private company. A few years ago, there was a story about an ex-googler who demanded and received access to Google financial information while Google was still private.
  - icedchai 11y ago
    Unfortunately I only have options at the moment. Perhaps I should exercise some of them just to get the financial info?
    - toomuchtodo 11y ago
      Exercise 1 share? Not a lawyer or accountant, but the tax liability for one share should be minimal.
  - deleted 11y ago
    [deleted]
  - prostoalex 11y ago
    It's a very limited set of documents, like prepared quarterly and annual statements.
    - akg_67 11y ago
      I agree the information typically provided by the private companies is limited. But they offer insight into health of the company. The person reviewing these statements need to know how to analyze and reconcile financial statements. Also, as shareholder, you can ask their finance person to explain/elaborate certain items in the statements. Shareholders' Equity section of Balance Sheet statement and Cash Flow from Financing Activities section of Cash Flow statement might also give additional insights. Company will be accounting for value of preferred shares, any dividend/interest paid on preferred on these statements. I am not sure how much an employee can push without jeopardizing the job. IME, most owners and executives of such entities are typically egomaniacs who don't like being questioned unless someone has bigger stick than them. My personal experience is very limited and only as external investor.
      - JonFish85 11y ago
        As an employee who left a company and purchased one share on the way out, I imagine I have nothing to lose? I wonder if I am entitled to this information.

tibbon 11y ago

Does anyone have tips as someone with ESOs how you can get a better idea of the value and your position, given preferred shares? I feel you never have as much diligence/information as an employee as a VC would who is investing in the company.

JonFish85 11y ago
You don't, and probably for a few reasons. An employee is not seen as being as important to the company as the people with many millions of dollars. "Open up your books or I won't come on board" won't make the company think twice about letting you leave. If a VC with $25m wants to look at the books, the company will at least think about it. On top of that, the people with millions of dollars can hire much better lawyers and such who can truly analyze a company a lot better than your average employee.