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I was part of a very well know incubator and a very early employee at a flagship company. Founder blew tons of cash and dilutions but that is part of it and I

I was part of a very well know incubator and a very early employee at a flagship company. Founder blew tons of cash and dilutions but that is part of it and I didn’t mind. What was ethically shady was shortly after I left with 4yrs vested they decided to restructure the entire company so they could attract investment. They took all the debt from the original company and put that in a shell company that then owned a portion of the new company. Guess where early employees’ stock went? The debt vehicle. I actually did make some money on the eventual exit, but probably 1 or 2 orders of magnitude off of what it would have been if my stock was in NewCo. Consider the tech we built was a major driver of the acquisition, it was frustrating. People are greedy, no matter how nice they are to your face.

seattle_spring 8y ago
A company I used to work for is in the process of doing this right now. Makes me feel really stupid spending ~10k exercising the shares.
- entangledqubit 8y ago
  While you're probably bound by some restricted shareholder agreement, you may get a lot of mileage by just asking a lawyer to ask some questions on your behalf. If this restructuring is going on in the context of some larger time sensitive deal, they may throw something your way to not screw up the timeline. Of course, this all depends on your tolerance for pain.
  - maxxxxx 8y ago
    I have heard that too. By raising an issue you may delay some deals so they may choose to pay you off just to get rid of you. But obviously there are no guarantees and hiring a lawyer may cost money.
  - MobileVet 8y ago
    Yea, I pinged the acting CEO... but I really should have had a lawyer make the inquiry to the founder & lead investor.
- AdamM12 8y ago
  I believe you should be able to write off a loss as cap gains or OID depending on how long after excise you liquidate. Will at least be able to get some back.
rottencupcakes 8y ago
Curious why you don't mention their name? Feels like there's little recourse against this sort of thing other than reputation risk, why not out them publically?
- entangledqubit 8y ago
  While I'm sure it would be quickly sued out of existence, are there sites specializing in this sort of information? I'd love to see names of founders/early investors/board members/... easily associated with these kinds of decisions (i.e. track records of the good and bad). I have to send feelers out into my network to dig up this kind of information but that's not an option for a lot of people new to the industry.
  - CPLX 8y ago
    Shame we don’t have fuckedcompany.com around for this any more.
    - njepa 8y ago
      Valleywag was essentially that, but did get sued out of existence.
- sjg007 8y ago
  it's all public info... fuckedcompany 2.0
- MobileVet 8y ago
  I don't know... not a fan of speaking ill of others even if they deserve it. Besides, I don't know for sure that it was illegal and it was a while back. It isn't worth the energy to dredge it up.
maxxxxx 8y ago
My first job in the US was at a startup located in an incubator building. In the same building was another startup that wasn't doing so well after a lot of growth and management there made sure that they would make some serious money at the firesale while everybody else made nothing. It really opened my eyes about the ethics of VCs and a lot of founders (who were very pleasant and nice people if you met them at the gym or the cafe).
blackflame7000 8y ago
That happened to me too. Owner restructuring companies or moving from LLC to LLC and then starting the vesting schedule over again. It's fairly common it seems that owners play games with the people who actually build the company after the work is done.
- anonytrary 8y ago
  Is that illegal? Sounds pretty illegal. I'd imagine the owner getting sued by his employees.
  - blackflame7000 8y ago
    What would you sue for in a startup that doesn't yet have value? Later on, if the company became worth something then yea you could sue but how do you work with the people to build something successful when you know that they are screwing you? It sucks because you sign on to something and change your whole career but once you do that they kind of have you trapped in a way. They can change the deal arbitrarily once you don't have a job to go back to and you don't have a lot of recourse until the company becomes profitable.
    - mutagenesis 8y ago
      A startup clearly has value even though it isn't a public company yet. Figuring out that value just has more steps. IANAL, but MobileVet's situation may have been illegal, running afoul of minority shareholder rights, if the situation was accurately described. I imagine what happened was the CEO divided the company then paid a pittance for the portion without the debt to the portion with the debt. You can't do this, or well, other shareholders have legal recourse if you do. If you play enough shell games, you can somewhat hide what you did. That doesn't make it legal. If this is the case, the CEO just relied on the former employees not doing anything.
      - blackflame7000 8y ago
        You are totally right with respect to the fact that it isn't aboveboard, but one of the biggest problems with our legal system is that you need money to protect your money. Other wise you'll go bankrupt while their attorneys file delay motions causing you to have to pay your attorney more and more. I was the CTO of a company and built its entire infrastructure for 4% of the business. One day I came into work and the CEO(and majority owner) tells me to put aside everything and start work on a totally separate project. Oh, yeah and the company name is now different. The new project that I'm assigned is much more intensive in terms of volume and uptime requirements and came with no rewards. So I start building the company in good faith with no real contract in place with the new company with the expectation that we would negotiate while I developed so as to not cause delays. This was a naive decision. Always get the contract first because as soon as real money starts flowing in everyone starts grabbing theirs. Prior friends or acquaintances also get preferential treatment which is how I ended up with the VP of marketing taking assignments from me and yet somehow being given 9x as much equity. Eventually, after the system was stable and I felt confident in my work quality I asked to negotiate my contract. I was instead let go. The joke was on them though, I revoked their access to the repository and told them to show me the contract that says the software is theirs.
throw03172019 8y ago
I went through an acquisition with a medium sized buyer who later restructured the company making the common stock essentially worthless. However, we were offered to buy the new stock class to equate to what we had before for a nominal fee (we already finished earn out and we’re gone for 2 years).
samstave 8y ago
I personally fucking hate that such shenangans be shielded and we dont know who the culprits are in such. Ill lay it out there: fuck lockheed martin. Fuck solyndra. You assholes need to be brought to task for raping so many people. You should be calling these “corporations” out. They arent some abstract concept, they are people. Look at theranos. Fuck her. Seriously folks have the balls to stand up against companies that are shady.
deleted 8y ago
[deleted]
zik 8y ago
That sounds like straight up shareholder fraud to me.
- MobileVet 8y ago
  Sure felt that way.
a13n 8y ago
I don't know if this is illegal, but it definitely should be. It'd be interesting to hear someone with a legal background chime in.

seattle_spring 8y ago

A company I used to work for is in the process of doing this right now. Makes me feel really stupid spending ~10k exercising the shares.

entangledqubit 8y ago
While you're probably bound by some restricted shareholder agreement, you may get a lot of mileage by just asking a lawyer to ask some questions on your behalf. If this restructuring is going on in the context of some larger time sensitive deal, they may throw something your way to not screw up the timeline. Of course, this all depends on your tolerance for pain.
- maxxxxx 8y ago
  I have heard that too. By raising an issue you may delay some deals so they may choose to pay you off just to get rid of you. But obviously there are no guarantees and hiring a lawyer may cost money.
- MobileVet 8y ago
  Yea, I pinged the acting CEO... but I really should have had a lawyer make the inquiry to the founder & lead investor.
AdamM12 8y ago
I believe you should be able to write off a loss as cap gains or OID depending on how long after excise you liquidate. Will at least be able to get some back.

rottencupcakes 8y ago

Curious why you don't mention their name? Feels like there's little recourse against this sort of thing other than reputation risk, why not out them publically?

entangledqubit 8y ago
While I'm sure it would be quickly sued out of existence, are there sites specializing in this sort of information? I'd love to see names of founders/early investors/board members/... easily associated with these kinds of decisions (i.e. track records of the good and bad). I have to send feelers out into my network to dig up this kind of information but that's not an option for a lot of people new to the industry.
- CPLX 8y ago
  Shame we don’t have fuckedcompany.com around for this any more.
  - njepa 8y ago
    Valleywag was essentially that, but did get sued out of existence.
sjg007 8y ago
it's all public info... fuckedcompany 2.0
MobileVet 8y ago
I don't know... not a fan of speaking ill of others even if they deserve it. Besides, I don't know for sure that it was illegal and it was a while back. It isn't worth the energy to dredge it up.

maxxxxx 8y ago

My first job in the US was at a startup located in an incubator building. In the same building was another startup that wasn't doing so well after a lot of growth and management there made sure that they would make some serious money at the firesale while everybody else made nothing. It really opened my eyes about the ethics of VCs and a lot of founders (who were very pleasant and nice people if you met them at the gym or the cafe).

blackflame7000 8y ago

That happened to me too. Owner restructuring companies or moving from LLC to LLC and then starting the vesting schedule over again. It's fairly common it seems that owners play games with the people who actually build the company after the work is done.

anonytrary 8y ago
Is that illegal? Sounds pretty illegal. I'd imagine the owner getting sued by his employees.
- blackflame7000 8y ago
  What would you sue for in a startup that doesn't yet have value? Later on, if the company became worth something then yea you could sue but how do you work with the people to build something successful when you know that they are screwing you? It sucks because you sign on to something and change your whole career but once you do that they kind of have you trapped in a way. They can change the deal arbitrarily once you don't have a job to go back to and you don't have a lot of recourse until the company becomes profitable.
  - mutagenesis 8y ago
    A startup clearly has value even though it isn't a public company yet. Figuring out that value just has more steps. IANAL, but MobileVet's situation may have been illegal, running afoul of minority shareholder rights, if the situation was accurately described. I imagine what happened was the CEO divided the company then paid a pittance for the portion without the debt to the portion with the debt. You can't do this, or well, other shareholders have legal recourse if you do. If you play enough shell games, you can somewhat hide what you did. That doesn't make it legal. If this is the case, the CEO just relied on the former employees not doing anything.
    - blackflame7000 8y ago
      You are totally right with respect to the fact that it isn't aboveboard, but one of the biggest problems with our legal system is that you need money to protect your money. Other wise you'll go bankrupt while their attorneys file delay motions causing you to have to pay your attorney more and more. I was the CTO of a company and built its entire infrastructure for 4% of the business. One day I came into work and the CEO(and majority owner) tells me to put aside everything and start work on a totally separate project. Oh, yeah and the company name is now different. The new project that I'm assigned is much more intensive in terms of volume and uptime requirements and came with no rewards. So I start building the company in good faith with no real contract in place with the new company with the expectation that we would negotiate while I developed so as to not cause delays. This was a naive decision. Always get the contract first because as soon as real money starts flowing in everyone starts grabbing theirs. Prior friends or acquaintances also get preferential treatment which is how I ended up with the VP of marketing taking assignments from me and yet somehow being given 9x as much equity. Eventually, after the system was stable and I felt confident in my work quality I asked to negotiate my contract. I was instead let go. The joke was on them though, I revoked their access to the repository and told them to show me the contract that says the software is theirs.

throw03172019 8y ago

I went through an acquisition with a medium sized buyer who later restructured the company making the common stock essentially worthless. However, we were offered to buy the new stock class to equate to what we had before for a nominal fee (we already finished earn out and we’re gone for 2 years).

samstave 8y ago

I personally fucking hate that such shenangans be shielded and we dont know who the culprits are in such. Ill lay it out there: fuck lockheed martin. Fuck solyndra. You assholes need to be brought to task for raping so many people. You should be calling these “corporations” out. They arent some abstract concept, they are people. Look at theranos. Fuck her. Seriously folks have the balls to stand up against companies that are shady.

deleted 8y ago

[deleted]

zik 8y ago

That sounds like straight up shareholder fraud to me.

MobileVet 8y ago
Sure felt that way.

a13n 8y ago

I don't know if this is illegal, but it definitely should be. It'd be interesting to hear someone with a legal background chime in.