3 ms·

It should be known about a thing called clawbacks. If you don't read the contract they could write something where that if at anytime you exercise they reserve

It should be known about a thing called clawbacks. If you don't read the contract they could write something where that if at anytime you exercise they reserve the right to buy back what you exercised. A FinTech company I worked for use to do this. To my surprise even the finance guys were in the dark are about the whole thing... nobody bothered to read the contract. The company is called Neptune Financial and basically every employee who works their is screwed in terms of equity compensation.

foobiekr 7y ago
One of our potential investors pressed this very hard: “if they don’t stick it out, why should they get paid?” and so on. We rejected them and went with someone sane. but I was shocked. this was coming from an upper-tier VC firm. One thing I am happy about is we never took bad money. Our series A firm was fantastic.
- crimsonalucard 7y ago
  I'm ok with that reasoning if you do something like a vesting period with a cliff at IPO. Make it clear tot he employee that the deal is... the employee only gets something if they stick it out. The thing with clawbacks is it's 100% deception. The 1 year cliff and vesting are all deliberate lies and manipulation.
  - foobiekr 7y ago
    I would not be OK with this policy even if it was spelled out, doubly so because it was a prospective series C investor that wanted it added to the existing (retroactively) and future options agreement. People often convince themselves that startups will IPO or whatever because that's a pre-requisite for joining one. People don't always make great decisions. Part of being a good person is accepting that caveat emptor is not an ethos that people should embrace. I talked with an engineer - most excellent - who was employee 1 at a startup that, at one point, became worth close to a billion dollars. He did not early exercise because they flubbed their 409a evaluation and his share would have been a $100k+ commitment at the time, and he'd just come out of two startups back to back that had failed after he'd EE'd and gone to zero. At year 6, he was absolutely almost ready to gnaw his own leg off, but he stuck it out to the IPO. He was absolutely miserable, he wanted to go. They would not convert his shares to NSOs and he could not afford the multi-million dollar tax bill he'd receive if he ee'd then. Good thing, though. It was grueling but he got through it and they did IPO. And then they crashed to essentially zero before the lockup expired and he got essentially nothing.

foobiekr 7y ago

One of our potential investors pressed this very hard: “if they don’t stick it out, why should they get paid?” and so on. We rejected them and went with someone sane. but I was shocked. this was coming from an upper-tier VC firm. One thing I am happy about is we never took bad money. Our series A firm was fantastic.

crimsonalucard 7y ago
I'm ok with that reasoning if you do something like a vesting period with a cliff at IPO. Make it clear tot he employee that the deal is... the employee only gets something if they stick it out. The thing with clawbacks is it's 100% deception. The 1 year cliff and vesting are all deliberate lies and manipulation.
- foobiekr 7y ago
  I would not be OK with this policy even if it was spelled out, doubly so because it was a prospective series C investor that wanted it added to the existing (retroactively) and future options agreement. People often convince themselves that startups will IPO or whatever because that's a pre-requisite for joining one. People don't always make great decisions. Part of being a good person is accepting that caveat emptor is not an ethos that people should embrace. I talked with an engineer - most excellent - who was employee 1 at a startup that, at one point, became worth close to a billion dollars. He did not early exercise because they flubbed their 409a evaluation and his share would have been a $100k+ commitment at the time, and he'd just come out of two startups back to back that had failed after he'd EE'd and gone to zero. At year 6, he was absolutely almost ready to gnaw his own leg off, but he stuck it out to the IPO. He was absolutely miserable, he wanted to go. They would not convert his shares to NSOs and he could not afford the multi-million dollar tax bill he'd receive if he ee'd then. Good thing, though. It was grueling but he got through it and they did IPO. And then they crashed to essentially zero before the lockup expired and he got essentially nothing.