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I missed over $1 million in options when one of my former companies was acquired. I still made good money but nowhere near the same. I was pretty sure it was go
by seibelj 6y ago
I missed over $1 million in options when one of my former companies was acquired. I still made good money but nowhere near the same. I was pretty sure it was going to sell, but I didn't know how long it would take (over 1 year for sure) and nothing in life is guaranteed.
If I had exercised all the options I would have had over $300k in paper gains for a tax bill. Instead I exercised 10% of what I had the ability to exercise. This is one major reason I will never work at a startup again unless I am the cofounder.
- sky_rw 6y agoDepending on the size of the startup at the time you join, I found it fairly easy to negotiate an extension to the exercise window. Likely because so few people even bring it up.
- seibelj 6y agoThere was 0% chance of that occurring as the CEO was a total shark. You would be shocked at how much of the cap table he retained vs. all the crazy funding shenanigans that happened. Very astute player of the game, he did very well. I will invest in his future companies but never work for him again.
- eli 6y agoWhy is it ok to fund that behavior if it’s victimizing people?
- seibelj 6y agoI was an employee not a cofounder. I agreed to the terms. He will do anything to succeed. I invest money in people who succeed. That is my opinion about where I will place investments in hyper-risky early stage startups. The biggest jerk in this whole thing is the USA tax code / IRS that made me pay taxes on paper gains.
- tehlike 6y agoCan you name the company, I'm curious
- seibelj 6y agoNo, sorry. But if you want to go through all of my comment history and google my name you may be able to guess. But I will not confirm anything.
- cs-szazz 6y agoI joined very early (~15 people total at the company) and have been unsuccessful negotiating an increase. I guess the lawyers have to get involved, board has to sign off, and that's tough. Or at least, that's what I've been told.
- sky_rw 6y agoThis is the ultimate YMMV scenario, and heavily dependent on how bad the company wants you. At the end of the day you need to be in a place where you can walk away from any deal that doesn't make sense. Unfortunately people looking for jobs at startups are usually somewhat desperate.
- cs-szazz 6y agoFair. I think the company wants me pretty badly, and knows I'll likely stick around because I'm still vesting. So there's no incentive for them to grant an exercise window extension at this point.
- jacquesm 6y agoBeware of the 'almost a co-founder' trap where the company is already incorporated and you join 48 hours later and find yourself with 1% instead of 25% and the three MBA types that are now CEO, CFO and COO tell you that those are founder shares too. This still happens way too often to tech people. Another way in which that can be arranged is that everybody puts some money in relative to your inability to do so as well. Putting $10K of your own money or not in at the beginning of a start-up should not have a 90% discrepancy in share allocation as a result.
- technofiend 6y agoI'm surprised a secondary market hasn't sprung up that lets you cash out options and pay the taxes via a margin loan of some kind. I guess the risk is too high that the options will end up worthless.
- dlubarov 6y agoThere are some companies that facilitate this, like EquityZen and Forge Global. It seems to be a legal gray area, since the options are legally non-transferable, so creatively structured contracts are used in an attempt to work around that.