5 ms·

In your situation, the company holds most of the cards, including if you are allowed to sell your shares to another party. I would talk with an attorney to see

In your situation, the company holds most of the cards, including if you are allowed to sell your shares to another party. I would talk with an attorney to see how your share docs are structured, and then explore how to work with the company to get value for your shares. For example, they might let you sell to an investor who really wants in. Keep in mind that the funding round valuation is somewhat irrelevant to you, as that was derived from the price of preferred shares, which have more privileges than your (likely) common shares. The company will be motivated to do the right thing by you, to avoid litigation and spooking current and prospective employees. You might not get all the value you might have hoped for, but likely most.

hueving 11y ago
>including if you are allowed to sell your shares to another party How does this work with right of first refusal?
- nwatson 11y ago
  I've wondered how that works too. I'd imagine you'd need a "firm offer" equivalent of cash-on-the-barrel from a third-party for your company shares, a non-further-negotiatable-contract-for-stock-purchase-with-lawyers involved. Then the lawyers would take that to your company, and if the company buys at the negotiated price the third-party loses, and if the company passes on it then the third-party gets the shares. You'd get the cash either way.
- not_that_noob 11y ago
  A ROFR gives the company the right to pay the price you are being offered and acquire the shares underlying the options. A ROFR has the effect of making potential buyers reluctant to even deal with you, as the company can swoop in at the last minute and take the shares by paying what was agreed to. So effectively, it puts the company in control of the situation, and so best to get them on board to whatever's happening. First talk to an attorney though - with this amount of money at stake, it would be stupid not to.
  - pc86 11y ago
    ROFR is pretty standard for partnership businesses (I'm not talking about startups, but actual businesses operating on revenue), so I'm not so sure about it having any chilling effect on negotiations. My wife and I own 1/3 of a brick and mortar business is our town, and once we made an official offer two other people had to sign a document saying they were made the offer and declined (or whatever the legalese is). It's pretty common and I've had no experience where it causes any issues. It's a cost of doing business when you're talking about equity in a business that has a lot of people involved.
- leroy_masochist 11y ago
  Some companies also have fine print in their equity agreement that employee equity holders must get the board's approval for any sales of the company's equity prior to the stock being listed on a public exchange. Employees / former employees are thereby locked into being equity owners until the company in question goes public or is acquired. If you leave the company, you have to exercise the options (typically within 30-60 days), and pay not only the strike price but the AMT on the difference between the strike price and the latest per-share valuation (i.e., the paper value of the options). So if you have options at a strike price of $50k that are now worth $5mm, you're in for well over $1mm of taxes payable -- now -- in cash. My understanding is that this practice is legally dubious and has been challenged, but IANAL.
  - samstave 11y ago
    I am of the opinion this exists to screw "the little guy" - becuase few employees who leave companies have the upfront cash for both options and taxes. This allows the company in question to effectively keep many shares/options that are given out to employees who were lured into the company with the "you're an equity partner!" line... only unicorns will pay all those little employees for the most part.
    - x0x0 11y ago
      2015: HN discovers golden handcuffs are for the employer, not the employee...
      - samstave 11y ago
        Regardless of the snark in your comment, there are many many people who need this spelled out for them.
        x0x0 11y ago
        Very true, but (imo obviously) employees here are generally deluded: your relationship with management and founders of your employer is an inherently adversarial relationship. Pretending otherwise benefits them and screws you.

hueving 11y ago

>including if you are allowed to sell your shares to another party How does this work with right of first refusal?

nwatson 11y ago
I've wondered how that works too. I'd imagine you'd need a "firm offer" equivalent of cash-on-the-barrel from a third-party for your company shares, a non-further-negotiatable-contract-for-stock-purchase-with-lawyers involved. Then the lawyers would take that to your company, and if the company buys at the negotiated price the third-party loses, and if the company passes on it then the third-party gets the shares. You'd get the cash either way.
not_that_noob 11y ago
A ROFR gives the company the right to pay the price you are being offered and acquire the shares underlying the options. A ROFR has the effect of making potential buyers reluctant to even deal with you, as the company can swoop in at the last minute and take the shares by paying what was agreed to. So effectively, it puts the company in control of the situation, and so best to get them on board to whatever's happening. First talk to an attorney though - with this amount of money at stake, it would be stupid not to.
- pc86 11y ago
  ROFR is pretty standard for partnership businesses (I'm not talking about startups, but actual businesses operating on revenue), so I'm not so sure about it having any chilling effect on negotiations. My wife and I own 1/3 of a brick and mortar business is our town, and once we made an official offer two other people had to sign a document saying they were made the offer and declined (or whatever the legalese is). It's pretty common and I've had no experience where it causes any issues. It's a cost of doing business when you're talking about equity in a business that has a lot of people involved.
leroy_masochist 11y ago
Some companies also have fine print in their equity agreement that employee equity holders must get the board's approval for any sales of the company's equity prior to the stock being listed on a public exchange. Employees / former employees are thereby locked into being equity owners until the company in question goes public or is acquired. If you leave the company, you have to exercise the options (typically within 30-60 days), and pay not only the strike price but the AMT on the difference between the strike price and the latest per-share valuation (i.e., the paper value of the options). So if you have options at a strike price of $50k that are now worth $5mm, you're in for well over $1mm of taxes payable -- now -- in cash. My understanding is that this practice is legally dubious and has been challenged, but IANAL.
- samstave 11y ago
  I am of the opinion this exists to screw "the little guy" - becuase few employees who leave companies have the upfront cash for both options and taxes. This allows the company in question to effectively keep many shares/options that are given out to employees who were lured into the company with the "you're an equity partner!" line... only unicorns will pay all those little employees for the most part.
  - x0x0 11y ago
    2015: HN discovers golden handcuffs are for the employer, not the employee...
    - samstave 11y ago
      Regardless of the snark in your comment, there are many many people who need this spelled out for them.
      - x0x0 11y ago
        Very true, but (imo obviously) employees here are generally deluded: your relationship with management and founders of your employer is an inherently adversarial relationship. Pretending otherwise benefits them and screws you.