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I worked for start-ups from my first job on up to three years ago (that's 10 years, because I am old). I have worked 60, 80, 100 hour weeks sometimes. Each of

I worked for start-ups from my first job on up to three years ago (that's 10 years, because I am old). I have worked 60, 80, 100 hour weeks sometimes. Each of the start ups in which I was an engineer were successfully acquired. The owners got millions in each case, I got a net payout over the course of four start-ups of about 15 grand. Not 15 grand each, 15 grand total. Sometimes I think about what a fool I was, and how much more money I could have made working for large companies at market rates, instead of killing myself for substandard salaries, even though there was some "love of the game" involved. Why is it that we need to exploit people in this game? Especially young engineers or execs with their first VP experiences. Some people get rich, most people are pawns.

joezydeco 15y ago
Funny thing...the startup where I'm working is about to face this exact situation. If the acquisition being planned does happen, I'll probably gross a few grand and that's it. As the only software engineer in the startup I've apaprently been identified as a key person in the move. I'd like to think this gives me some leverage, it would take them 3-4 months to find a replacement and get them up to speed. It was my work on early customers and technology demos that helped land the deal, yet I feel like none of that is being recognized. What would you do if you were me?
- EwanG 15y ago
  Take my contract to a lawyer and see if I have any of the leverage I "think" I have. I suspect you don't have much. Basically if you are working for a startup, (or any company where you are building sweat equity), and your employee number is larger than 2, then you had better have what you think you are getting spelled out specifically in your contract unless you really don't care. That said, I don't think it's that people are "out to get you" as much as they are usually rather focused during a transition on making sure they themselves are taken care of.
  - ootachi 15y ago
    The leverage in this case has nothing to do with the specific employment contract and everything to do with the market for engineers right now. I suspect that having the only engineer who understands the code threaten to leave right before an acquisition actually does constitute significant leverage. I second the advice to ask for a retention bonus. Cash compensation is the easiest way to ensure that no shenanigans can take place.
    - joezydeco 15y ago
      Thanks everyone for the advice. Long story short I'm definitely in an "at will" state, my employee # is higher than 2, and while I've received a small amount of restricted stock that will vest immediately upon takeover, it won't be worth much and I believe there will be an earn-out to stretch that value over a way longer period of time. So pretty much nothing of value. If we do this deal we're all pretty much going to be slotted into the new company with predetermined titles and salary. I've already made my case to the CEO of where I expect to land on both parts, so I'm sure he knows what I'm thinking. I have absolutely no qualms about leaving for another job, so it's his choice to make. We'll see what happens. I just don't know if there is anything else I should be doing at this point. I could make a lot of noise and make things very uncomfortable, but in the end that will probably only hurt just me. My thought was to press for a retention employment contract, but perhaps just a retention bonus is the way to go.
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- LiveTheDream 15y ago
  If you are really a key person in the acquisition, then the whole thing could fall through if you walk away. That should give you a lot of leverage. Speak with the CEO and a lawyer to make sure you are represented fairly. "Fairly" could have lots of interpretations here; what I mean is in line with the intent of your original agreement (no shady buy-back of vested options). Negotiating a retention bonus also seems fair.
- dgabriel 15y ago
  The only thing you can really negotiate at this point is a "retention bonus." So my advice is to negotiate a bonus for 3-4 months that is as close to your annual salary as possible. I did something similar with my last company, but I didn't hold out for enough compensation. In hindsight, the deal would have folded without me, but I wasn't confident to ask for enough. In fact, here's a note to founders: if you promise your employees a year's salary in case of acquisition, your people will stay with you. Say you offer that in conjunction with options, you are already a better employer than 99.9% of other founders.
- anamax 15y ago
  > It was my work on early customers and technology demos that helped land the deal, yet I feel like none of that is being recognized. You've already gotten whatever compensation you're going to get for that work. If they think that they'll need more of that going forward, your next deal should reflect that. > As the only software engineer in the startup I've apaprently been identified as a key person in the move. Why do you think that you're a key person? Seriously - being the only software engineer isn't enough. > I'd like to think this gives me some leverage, it would take them 3-4 months to find a replacement and get them up to speed. If you're really key, the acquirer should be negotiating with you, not them. (I'm assuming that you don't have an employment contract that your current company can sell.) Think about things from the acquirer's point of view. Your current company doesn't actually know what it will take to keep you around. And from your point of view, is your current company really going to care what kind of deal you get?
  - joezydeco 15y ago
    All really really good points. Thanks for the reality check. I know I've been identified as a key senior person in the organization from seeing some documentation that is being used in the negotiation. I was also handed a second round of preferred stock right before the talks started. There was no explanation given, but I'm guessing it was meant to temporarily keep me happy. I realize being the only software engineer isn't enough. It our company was a web-based concern, especially so. (We're in manufacturing). Like I said earlier, I know they can find a replacement but it would steal momentum which is something the acquirer wants. What I'm most uncertain about is how the transition will take place. I know one day we'll just be told to show up at a new office and ohOneMoreThing here's your new comp package which has been decided for you kthxbye. I'm pretty certain the acquirer won't be approaching me. To them we look like a turnkey operation. My current company knows what it will take to keep me around because I told them so. Whether or not it's communicated upward is my concern.
    - anamax 15y ago
      > I'm pretty certain the acquirer won't be approaching me. To them we look like a turnkey operation. Huh? "turnkey operation" does not imply "won't fall apart if the wrong people leave". > Whether or not it's communicated upward is my concern. Then you're hosed, going to feel used, .... You're the only one who cares whether you get what you deserve. If you don't care either, then no one cares. Note that the sellers want to argue that you aren't essential, because if you are, the acquirer needs to take care of you. Taking care of you increases the cost of the acquisition. (That can put the deal at risk and can reduce their payout.) No, an earnout clause doesn't change their motivation wrt you much.
ap22213 15y ago
Yes - this happened to me three times in my early 20-somethings. Sadly, with the tech media reporting on all the riches being made these days, I expect it happens even more often now. It's so easy for one to be overly trusting and conned while blinded by the huge payout mirage up ahead. I hope the Skype fiasco at least brings more awareness to the risks.

joezydeco 15y ago

Funny thing...the startup where I'm working is about to face this exact situation. If the acquisition being planned does happen, I'll probably gross a few grand and that's it. As the only software engineer in the startup I've apaprently been identified as a key person in the move. I'd like to think this gives me some leverage, it would take them 3-4 months to find a replacement and get them up to speed. It was my work on early customers and technology demos that helped land the deal, yet I feel like none of that is being recognized. What would you do if you were me?

EwanG 15y ago
Take my contract to a lawyer and see if I have any of the leverage I "think" I have. I suspect you don't have much. Basically if you are working for a startup, (or any company where you are building sweat equity), and your employee number is larger than 2, then you had better have what you think you are getting spelled out specifically in your contract unless you really don't care. That said, I don't think it's that people are "out to get you" as much as they are usually rather focused during a transition on making sure they themselves are taken care of.
- ootachi 15y ago
  The leverage in this case has nothing to do with the specific employment contract and everything to do with the market for engineers right now. I suspect that having the only engineer who understands the code threaten to leave right before an acquisition actually does constitute significant leverage. I second the advice to ask for a retention bonus. Cash compensation is the easiest way to ensure that no shenanigans can take place.
  - joezydeco 15y ago
    Thanks everyone for the advice. Long story short I'm definitely in an "at will" state, my employee # is higher than 2, and while I've received a small amount of restricted stock that will vest immediately upon takeover, it won't be worth much and I believe there will be an earn-out to stretch that value over a way longer period of time. So pretty much nothing of value. If we do this deal we're all pretty much going to be slotted into the new company with predetermined titles and salary. I've already made my case to the CEO of where I expect to land on both parts, so I'm sure he knows what I'm thinking. I have absolutely no qualms about leaving for another job, so it's his choice to make. We'll see what happens. I just don't know if there is anything else I should be doing at this point. I could make a lot of noise and make things very uncomfortable, but in the end that will probably only hurt just me. My thought was to press for a retention employment contract, but perhaps just a retention bonus is the way to go.
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LiveTheDream 15y ago
If you are really a key person in the acquisition, then the whole thing could fall through if you walk away. That should give you a lot of leverage. Speak with the CEO and a lawyer to make sure you are represented fairly. "Fairly" could have lots of interpretations here; what I mean is in line with the intent of your original agreement (no shady buy-back of vested options). Negotiating a retention bonus also seems fair.
dgabriel 15y ago
The only thing you can really negotiate at this point is a "retention bonus." So my advice is to negotiate a bonus for 3-4 months that is as close to your annual salary as possible. I did something similar with my last company, but I didn't hold out for enough compensation. In hindsight, the deal would have folded without me, but I wasn't confident to ask for enough. In fact, here's a note to founders: if you promise your employees a year's salary in case of acquisition, your people will stay with you. Say you offer that in conjunction with options, you are already a better employer than 99.9% of other founders.
anamax 15y ago
> It was my work on early customers and technology demos that helped land the deal, yet I feel like none of that is being recognized. You've already gotten whatever compensation you're going to get for that work. If they think that they'll need more of that going forward, your next deal should reflect that. > As the only software engineer in the startup I've apaprently been identified as a key person in the move. Why do you think that you're a key person? Seriously - being the only software engineer isn't enough. > I'd like to think this gives me some leverage, it would take them 3-4 months to find a replacement and get them up to speed. If you're really key, the acquirer should be negotiating with you, not them. (I'm assuming that you don't have an employment contract that your current company can sell.) Think about things from the acquirer's point of view. Your current company doesn't actually know what it will take to keep you around. And from your point of view, is your current company really going to care what kind of deal you get?
- joezydeco 15y ago
  All really really good points. Thanks for the reality check. I know I've been identified as a key senior person in the organization from seeing some documentation that is being used in the negotiation. I was also handed a second round of preferred stock right before the talks started. There was no explanation given, but I'm guessing it was meant to temporarily keep me happy. I realize being the only software engineer isn't enough. It our company was a web-based concern, especially so. (We're in manufacturing). Like I said earlier, I know they can find a replacement but it would steal momentum which is something the acquirer wants. What I'm most uncertain about is how the transition will take place. I know one day we'll just be told to show up at a new office and ohOneMoreThing here's your new comp package which has been decided for you kthxbye. I'm pretty certain the acquirer won't be approaching me. To them we look like a turnkey operation. My current company knows what it will take to keep me around because I told them so. Whether or not it's communicated upward is my concern.
  - anamax 15y ago
    > I'm pretty certain the acquirer won't be approaching me. To them we look like a turnkey operation. Huh? "turnkey operation" does not imply "won't fall apart if the wrong people leave". > Whether or not it's communicated upward is my concern. Then you're hosed, going to feel used, .... You're the only one who cares whether you get what you deserve. If you don't care either, then no one cares. Note that the sellers want to argue that you aren't essential, because if you are, the acquirer needs to take care of you. Taking care of you increases the cost of the acquisition. (That can put the deal at risk and can reduce their payout.) No, an earnout clause doesn't change their motivation wrt you much.

ap22213 15y ago

Yes - this happened to me three times in my early 20-somethings. Sadly, with the tech media reporting on all the riches being made these days, I expect it happens even more often now. It's so easy for one to be overly trusting and conned while blinded by the huge payout mirage up ahead. I hope the Skype fiasco at least brings more awareness to the risks.