4 ms·

Help who? I’m specifically talking about an employee getting standard common stock. If liquidation preferences are coming into play, you’ve already lost as a

Help who? I’m specifically talking about an employee getting standard common stock. If liquidation preferences are coming into play, you’ve already lost as a common shareholder. But you should never be in that situation to begin with. If a company is struggling or growing slowly, quit and join one that isn’t.

pclmulqdq 4y ago
Liquidation preferences advantage you compared to common stockholders in any situation that isn't an IPO. In a slightly disappointing acquisition (the most common outcome for a "successful" startup), it saves your butt. If you have double-dipping shares or a higher liquidation preference, you are going to make a lot of money in a bad acquisition situation. Liquidation preferences are cheap insurance against bad outcomes. Most startups have bad outcomes. However, people getting common stock are hurt by every share with a liquidation preference. It is in your interest, as a startup investor (or employee), to get a liquidation preference if you can.
- peter422 4y ago
  There is not a single respectable startup in existence that will give a random employee options or stock with liquidation preferences. For 99.9% of startups that would involve making a new class of shares for you, which ain’t gonna happen. Investor is of course completely different for many reasons and I’m not speaking to that. And anyways unless you are leading the round, which you aren’t, you are just getting whatever preferences the lead is getting anyways.
  - pclmulqdq 4y ago
    Nobody would give you preferred stock, which is why you need to demand an absolutely absurd premium on the amount of common stock that they offer. Also, it generally doesn't need a new class of shares, just a vote by the board. Edit: Just to clarify, if you want to hire a mercenary, you can't do it expecting that they will take the same value of your stock that your true believer investors took without any of the guarantees that your investors got. They are investing time into your company and you need to make it worth it.
    - peter422 4y ago
      This just doesn’t make sense though. A company is going to have some standard bands of compensation, and if you demand something way outside of the bands based on your own feelings of stock value, they aren’t going to hire you no matter how great you are. Part of the reason companies can give generous stock grants are precisely because they are the lowest tier of stock. This also is a stupid thing to bargain: if the company keeps growing, preferred and common will be worth the exact same thing. So instead of trying to extract better preferences on the stock (which you won’t), join a fast growing company and leave if it stops growing fast.
      - lmm 4y ago
        > A company is going to have some standard bands of compensation, and if you demand something way outside of the bands... If you're joining early enough to get enough equity to matter, you're early enough that they don't have standard bands. You can absolutely negotiate. > if the company keeps growing, preferred and common will be worth the exact same thing. Only if it ends in an IPO. An acquisition, even a "successful" one, can easily end up with the preferences kicking in.

pclmulqdq 4y ago

Liquidation preferences advantage you compared to common stockholders in any situation that isn't an IPO. In a slightly disappointing acquisition (the most common outcome for a "successful" startup), it saves your butt. If you have double-dipping shares or a higher liquidation preference, you are going to make a lot of money in a bad acquisition situation. Liquidation preferences are cheap insurance against bad outcomes. Most startups have bad outcomes. However, people getting common stock are hurt by every share with a liquidation preference. It is in your interest, as a startup investor (or employee), to get a liquidation preference if you can.

peter422 4y ago
There is not a single respectable startup in existence that will give a random employee options or stock with liquidation preferences. For 99.9% of startups that would involve making a new class of shares for you, which ain’t gonna happen. Investor is of course completely different for many reasons and I’m not speaking to that. And anyways unless you are leading the round, which you aren’t, you are just getting whatever preferences the lead is getting anyways.
- pclmulqdq 4y ago
  Nobody would give you preferred stock, which is why you need to demand an absolutely absurd premium on the amount of common stock that they offer. Also, it generally doesn't need a new class of shares, just a vote by the board. Edit: Just to clarify, if you want to hire a mercenary, you can't do it expecting that they will take the same value of your stock that your true believer investors took without any of the guarantees that your investors got. They are investing time into your company and you need to make it worth it.
  - peter422 4y ago
    This just doesn’t make sense though. A company is going to have some standard bands of compensation, and if you demand something way outside of the bands based on your own feelings of stock value, they aren’t going to hire you no matter how great you are. Part of the reason companies can give generous stock grants are precisely because they are the lowest tier of stock. This also is a stupid thing to bargain: if the company keeps growing, preferred and common will be worth the exact same thing. So instead of trying to extract better preferences on the stock (which you won’t), join a fast growing company and leave if it stops growing fast.
    - lmm 4y ago
      > A company is going to have some standard bands of compensation, and if you demand something way outside of the bands... If you're joining early enough to get enough equity to matter, you're early enough that they don't have standard bands. You can absolutely negotiate. > if the company keeps growing, preferred and common will be worth the exact same thing. Only if it ends in an IPO. An acquisition, even a "successful" one, can easily end up with the preferences kicking in.