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> Founders (and early investors) don't necessarily have preference It completely depends on the term sheet, but liquidation preference has been a thing for a l
by tomnipotent 6y ago
> Founders (and early investors) don't necessarily have preference
It completely depends on the term sheet, but liquidation preference has been a thing for a loooong time. Also I meant to say "preference stack" instead of "preferred stock".
> they can be taken care of other ways in the earn out
The OP was asking why employees can make nothing during an acquisition, not if founders or investors are charitable.
https://angel.co/blog/liquidation-preference-your-equity-could-be-worth-millions-or-nothing https://angel.co/blog/liquidation-preference-your-equity-cou...
- ska 6y ago> The OP was asking why employees can make nothing during an acquisition, Right, and one of the ways that can happen is that founders do not have preference and their stock goes to nothing with the rest of the common (e.g. an equity group has your debt and 2x preference, they get almost all of the sale price). But to keep the founders on side and "cohesion" through the transfer, they are offered money outside of the equity sale in the earn out terms. If all goes well they still make ok/good money on the deal, but none/little of it is from their equity. If you are engineer #47 you may or may not have a job after the acquisition but your equity value just vanished.