4 ms·

I would be very interested in knowing the specific details of how you got your equity stolen in a legal way, if you have some time to reply. Thanks

abraham_lincoln 8y ago
I am guessing no agreement regarding dilution and/or liquidity preference?
- deanmoriarty 8y ago
  What you’re mentioning sounds more like a case where the company was not a big success and things like heavy dilution came into play? In that case, I’d hardly call it “getting screwed”, that’s just a risk of doing business with a startup that failed to execute properly, or lost against opposing market forces. In other words, when the company goes bad and it’s forced to take heavy dilution or aggressive liquidation preferences it’s obvious that common holders are going to get wiped out. But, and that’s the part interesting to me, what greedy behavior from a company can make the common holders get screwed even when the company sale is a big success? An example of getting screwed was the clawback clause that the Skype employees had, which gave the company the right of buying back the exercised shares from common holders at the original exercise price rather than the market value at sale time (or something like that). That’s called “being screwed”, not seeing your shares getting wiped out because your founders had to dilute the common holders (which many times includes themselves) 50% during a difficult fundraise.
crunchlibrarian 8y ago
Basically they pretended to go out of business and reorganized the company slightly to purge all equity holders they didn't actually want to have equity. I lawyered up but I can only afford a five figure lawyer, at that point they were willing to bring in a seven figure lawyer so that was that.
- deanmoriarty 8y ago
  Oh wow. Yes, that's definitely called getting screwed. What a shady world :(

abraham_lincoln 8y ago

I am guessing no agreement regarding dilution and/or liquidity preference?

deanmoriarty 8y ago
What you’re mentioning sounds more like a case where the company was not a big success and things like heavy dilution came into play? In that case, I’d hardly call it “getting screwed”, that’s just a risk of doing business with a startup that failed to execute properly, or lost against opposing market forces. In other words, when the company goes bad and it’s forced to take heavy dilution or aggressive liquidation preferences it’s obvious that common holders are going to get wiped out. But, and that’s the part interesting to me, what greedy behavior from a company can make the common holders get screwed even when the company sale is a big success? An example of getting screwed was the clawback clause that the Skype employees had, which gave the company the right of buying back the exercised shares from common holders at the original exercise price rather than the market value at sale time (or something like that). That’s called “being screwed”, not seeing your shares getting wiped out because your founders had to dilute the common holders (which many times includes themselves) 50% during a difficult fundraise.

crunchlibrarian 8y ago

Basically they pretended to go out of business and reorganized the company slightly to purge all equity holders they didn't actually want to have equity. I lawyered up but I can only afford a five figure lawyer, at that point they were willing to bring in a seven figure lawyer so that was that.

deanmoriarty 8y ago
Oh wow. Yes, that's definitely called getting screwed. What a shady world :(