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We can change anything at anytime for any reason In private companies, always remember: (1) control ≠ equity (2) equity ≠ profit (3) equity ≠ information. If
by contingencies 6y ago
We can change anything at anytime for any reason
In private companies, always remember: (1) control ≠ equity
(2) equity ≠ profit (3) equity ≠ information.
If this is new to you read Brad Feld's Venture Deals book and do the online course, it's time well invested.
Note this is simply the nature of private equity. Companies go public to drink at the capitalisation trough of public markets, but the cost is regulation and increased transparency. Companies that stay private are rarely bound by significant rules in terms of board or management decisions redefining structure, equity, terms and so forth. There are at least four key firewalls (exercise, issue, share class, transfer) between "options" as issued or promised and meaningful equity value extraction for an employee. Good lawyers can probably name five more, and definitely dream up or deploy tens more at any time without breaking laws.
- marcus_holmes 6y agoI learned this in my first board position with VC's on the board (early 2000's). Thankfully I was vital to the company's platform, so had some leverage. But everything was fluid, and able to be changed according to how the VC's needed to present it in terms of a consistently successful investment story. In the end, I walked away with less than I hoped but more than I think I deserved (for being so naive). But it's been an abject lesson since: nothing in a private company is fixed, it can all be changed according to who pulls the strings. Options and equity are very vulnerable to this. Having equity is no guarantee of power or even a seat at the table (or of future wealth).