10 ms·

I think it's worth it still. Depending a lot on the company: * Ask questions to founders if they raise on participating preferred (the worst). Don't take a j

by sb8244 3y ago

I think it's worth it still. Depending a lot on the company: * Ask questions to founders if they raise on participating preferred (the worst). Don't take a job if they do or if they won't answer * Find a place with early exercise of options * Find a place with a healthy company culture. (I believe this correlates) I made a lot off of options, while having a good salary. I know others that did the same.

onion2k 3y ago
I made a lot off of options.. Note the past tense. The way startups operated a decade ago is quite different to the way they operate now. The tricks to get the most from employees without giving away much equity are more widely known now. I have no doubt that there are still some moral and ethical startups about, but I also think there are many, many more who give out stock with absolutely no intention of it becoming valuable in the future these days.
- sb8244 3y ago
  I think this is a pessimistic view of the situation and I don't subscribe to it being the norm today. I run a (still small, 1.5M ARR) tech startup and we treat our employees fairly. Low / clean investment table, early exercise for employees that make early employee risk effectively 0, upfront about how to deal with options, alongside market salaries. But maybe I am not the norm and it's more common for people to get screwed over. However, I have several friends at startups that have similar recent stories with their options.
ramraj07 3y ago
What does “raise on participating preferred” mean? How is it so hard for people like me who are good engineers to still not be at the bottom of all these terms lol.
- sb8244 3y ago
  I asked lots of questions to the founder of the company I was at. He was very nice in always answering me and helping me understand what's good / bad. I try to pass it on but I'm not sure how to proactively get the knowledge other than reading something like "All about VC fundraising" (fake post, I'm sure it exists) and hoping it's there. Participating preferred = investor invests 50M on 1x participating preferred and company sells for 100M. The investor makes 50M + their % share of the company. Common stock makes % share of 50M. They participate in the % sales ON TOP OF their preferred stocks liquidation preference (money in = money out before common stock value is considered) Now here's where it gets nasty. 2x participating preferred = investor invests 50M and company sells for 100M. Investor makes 100M and common stock makes $0. Or if the company sold for 150M, investor makes 100M and participates in the % stock value from 50M. It's a bit confusing, but the short is participating preferred is the absolute worst terms for common stock holders (founders included.)
ytx 3y ago
But is there any recourse to the founders telling you one thing and then raising differently later because "circumstances have changed?"
- sb8244 3y ago
  Of course not, but there's a big difference between persistent bad raises and a single one. Bad terms are raised due to bad founders (not knowing better) but more likely bad company health. (That can include trying to raise 50M series A as we saw in past 2 years.) A healthy company with good founders (or lawyers) should be able to avoid issues.

by sb8244 3y ago

onion2k 3y ago

I made a lot off of options.. Note the past tense. The way startups operated a decade ago is quite different to the way they operate now. The tricks to get the most from employees without giving away much equity are more widely known now. I have no doubt that there are still some moral and ethical startups about, but I also think there are many, many more who give out stock with absolutely no intention of it becoming valuable in the future these days.

sb8244 3y ago
I think this is a pessimistic view of the situation and I don't subscribe to it being the norm today. I run a (still small, 1.5M ARR) tech startup and we treat our employees fairly. Low / clean investment table, early exercise for employees that make early employee risk effectively 0, upfront about how to deal with options, alongside market salaries. But maybe I am not the norm and it's more common for people to get screwed over. However, I have several friends at startups that have similar recent stories with their options.

ramraj07 3y ago

What does “raise on participating preferred” mean? How is it so hard for people like me who are good engineers to still not be at the bottom of all these terms lol.

sb8244 3y ago
I asked lots of questions to the founder of the company I was at. He was very nice in always answering me and helping me understand what's good / bad. I try to pass it on but I'm not sure how to proactively get the knowledge other than reading something like "All about VC fundraising" (fake post, I'm sure it exists) and hoping it's there. Participating preferred = investor invests 50M on 1x participating preferred and company sells for 100M. The investor makes 50M + their % share of the company. Common stock makes % share of 50M. They participate in the % sales ON TOP OF their preferred stocks liquidation preference (money in = money out before common stock value is considered) Now here's where it gets nasty. 2x participating preferred = investor invests 50M and company sells for 100M. Investor makes 100M and common stock makes $0. Or if the company sold for 150M, investor makes 100M and participates in the % stock value from 50M. It's a bit confusing, but the short is participating preferred is the absolute worst terms for common stock holders (founders included.)

ytx 3y ago

But is there any recourse to the founders telling you one thing and then raising differently later because "circumstances have changed?"

sb8244 3y ago
Of course not, but there's a big difference between persistent bad raises and a single one. Bad terms are raised due to bad founders (not knowing better) but more likely bad company health. (That can include trying to raise 50M series A as we saw in past 2 years.) A healthy company with good founders (or lawyers) should be able to avoid issues.