If the investors had bought in, Episode 2 would have 60% of the investors either being made so miserable they quit, or fired "for performance" after 364 days of

If the investors had bought in, Episode 2 would have 60% of the investors either being made so miserable they quit, or fired "for performance" after 364 days of service ("cliff") so they get nothing--of course, even the employees who do hold on rarely get anything, but that's another story. The really sickening thing is that most acquisitions (since that's the likely route for these companys, if they succeed at all) involve the common stock getting wiped out while the executives get "management incentive plans" in new stock. They still get screwed if they leave the acquirer (since their vesting clocks usually reset) but they at least have a shot at getting something.