My uncle went through a very similar situation as the OP. He was CTO at a medical startup that raised a ton of money early on based on promising research and ea

My uncle went through a very similar situation as the OP. He was CTO at a medical startup that raised a ton of money early on based on promising research and early results. Federal approval in the medical industry takes a mountain of cash and a long runway, by the time they got close to approval the money had dried up and the CEO was deep in the weeds of political infighting among the company leadership. I forget the exact details as both the CEO and the board were pulling quite a few nasty moves along the way, but eventually an internal round was used similarly to set a much lower valuation before raising more outside capital. My uncle hadn't left on the best terms, the company was attempting to shove him out and block him from taking part in the internal round to protect his early shares. Not too surprisingly this ended up in court (or arbitration?), but the moral is the same. When you take early shares there are ways the value can be stripped from you even if the shares aren't. There are good arguments for an internal round to reset a lower valuation, but it can easily be used as an offensive tactic to go after current share holders. I don't think people often realize what all is really on the table when signing up for a startup. I've worked for a few early startups and will take options or shares, but I view them entirely as a gamble and assume outside investors will chip away at their value before anything is ever cashed in. If I were ever to join as an executive level or founding board member I'd be worried more about sizing up the other members than the business itself. Unfortunately its sometimes more about politics and dirty tactics at that level than it is about what the company is actually producing.