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The employees didn't pay for their options because the options were "out of the money" and the employees had various confirmations that the shares would not be

The employees didn't pay for their options because the options were "out of the money" and the employees had various confirmations that the shares would not be worth anything, but they still had the choice to. Yeah I guess cautionary tale is the good word here. > watching the early employees lose out on their equity because they were told the company was a failure is not cool eh, they had the choice, this isn't a story of the share class changing or the entity being changed, and you had to write presumably because you don't know and are relying on the financial unsophistication of many tech employees can be a tough choice to both earn below market salary and then be expected to use that income to buy your shares. sadly this is due to various tax law changes over the last few decades. but yeah this isn't "egregious enough" for me to garner anything from it. its a case study about how much you can do with contractors and that you don't need venture capital or the employee structure if you know what you actually want to build

PragmaticPulp 6y ago
> The employees didn't pay for their options because the options were "out of the money" and the employees had various confirmations that the shares would not be worth anything, but they still had the choice to. That’s a side effect of the problem, not the cause of the problem. Why did the employee options expire worthless? Because they were issued at one valuation, then the investors changed the valuation to $0. Yet the company and technology didn’t change. In fact, it kept operating with the same brand, same customers, and website. The investors and founder both dipped the valuation to zero because it was in their best personal interests, dropping employees with options in the process. That’s why I framed this as a cautionary tale for employees looking to help startups. This wouldn’t have been a big deal if the company simply went through the normal failure process where the IP was sold on the open market in the normal process. Even if the founder had bought the company IP back for $1 if no one else wanted it, that would have at least persevered some appearance of fairness.
- vmception 6y ago
  I see, thats strange, do we know who the investors were? I didn't look at Crunchbase or anything yet Just an odd thing to agree to, if the IP had value and there were no creditors but the prospects were bad then this was improper. If there were creditors, what happened to them?

PragmaticPulp 6y ago

> The employees didn't pay for their options because the options were "out of the money" and the employees had various confirmations that the shares would not be worth anything, but they still had the choice to. That’s a side effect of the problem, not the cause of the problem. Why did the employee options expire worthless? Because they were issued at one valuation, then the investors changed the valuation to $0. Yet the company and technology didn’t change. In fact, it kept operating with the same brand, same customers, and website. The investors and founder both dipped the valuation to zero because it was in their best personal interests, dropping employees with options in the process. That’s why I framed this as a cautionary tale for employees looking to help startups. This wouldn’t have been a big deal if the company simply went through the normal failure process where the IP was sold on the open market in the normal process. Even if the founder had bought the company IP back for $1 if no one else wanted it, that would have at least persevered some appearance of fairness.

vmception 6y ago
I see, thats strange, do we know who the investors were? I didn't look at Crunchbase or anything yet Just an odd thing to agree to, if the IP had value and there were no creditors but the prospects were bad then this was improper. If there were creditors, what happened to them?