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Couple of thoughts as a founder and investor: 1) The company is disincentivized to help you sell your stock/options because it will create a new valuation of c
by dotBen 9y ago
Couple of thoughts as a founder and investor:
1) The company is disincentivized to help you sell your stock/options because it will create a new valuation of common stock. Companies use the lure of a low 409a to attract employees, especially savvy executives, with equity packages. Doing anything to set a higher future strike price is not in their interest.
2) Your NDA almost certainly prohibits you from communicating anything meaningful about the financial success and any future roadmap to possible investors. The company isn't required to open their books to a potential new purchaser and the limited data you can get via Delaware company shareholder rights almost certainly can't be communicated either.
3) It is illegal to market your shares to non-accredited investors.
4) Remember you are selling common, investors are almost always buying preferred with liquidation preferences and other rights attached. The valuation you can ever achieve is limited pre-exit (where all shares usually achieve the same valuation).
Things you can do:
1) The best time to sell like this is during the next round of fundraising. If you are on good terms with the company and probably have already left the company, you may be able to tack on your common shares in a sidenote to one of the investors.
2) Approach existing shareholders (including the founders) as they are best placed to buy your shares. Remember though they probably have board material access and will have more informational rights and access than you do. They will try to price down the shares below their true value.
3) Some specialist secondary VC firms exist who will either buy shares or offer you a personal warrant on the shares. You probably need to be holding $1MM+ of equity for this to be worthwhile.
Overall: this is really a firesale approach. If the company is doing well, existing investors will buy at a huge discount and if the company is not doing well/unclear you almost certainly won't be able to sell.
It's almost certainly never worth trying to sell pre-exit.
- somberi 9y agoVoting this up. I came here to opine something similar. My POV is similar to that of the parent (Founder and Investor).
- lmeyerov 9y agoYep, strong +1 to the "sell at next round" and find a way to make it worth the while of the founders. They'll dictate what happens and it is, at best, a distraction for them, and at worst, a problem. Ex: When a round is already oversubscribed yet they still want to do someone a favor, such as for a stronger advisory relationship, they may be willing to sell your common as part of the round on your behalf.
- wtvanhest 9y agoThis is why google/facebook/snapchat/airbnb etc. take the best talent. There is an opportunity for early stage companies to create equity packages that attract great people. It is really a shame.
- segah 9y agoOP here. This is straight from the theory book. But from my experience there is a lot more gray area
- paulsutter 9y ago> Overall: this is really a firesale approach...It’s almost certainly never worth trying to sell pre-exit You advice was great up until this bit, at which point you are completely wrong. The best time to sell shares is on an up round. There will be people who didn’t get in who want to. It’s perfectly common that they’re underallocated to a company that you’re overallocated. That’s not a fire sale it’s just a deal that make sense.
- Kiro 9y ago> Some specialist secondary VC firms exist Do you have any names or links?
- hb3b 9y agoCan anyone advise on which documents would be worth requesting under Delaware company shareholder rights to help assess stock value?