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Employment contacts can have a buyback option for any stock you own as soon as you leave the company at the original price or private 'fair market value' valuat
by mahyarm 14y ago
Employment contacts can have a buyback option for any stock you own as soon as you leave the company at the original price or private 'fair market value' valuation price to avoid the '500 shareholders' problem as you churn through employees. If the '500 shareholders' problem doesn't exist in this case actually (I don't know myself), then they'll definitely use it as an excuse as to why they have it.
You effectively don't own your stock, and it doesn't let you move on after a year or two to something else and still keep the stock if you think the company will go somewhere.
I think skype did this to screw their employees out of their stock.
Before you start with a company, ask if they have this kind of clause!
- rdl 14y agoThat's a pretty rare clause in startups, which is why people wanted to hang Skype (and Silver Lake Partners) so much over it. It's apparently fairly common for management in PE-led turnaround deals, but I've never heard of it in startups except for the Skype deal. (What shocked me was that a16z was in on the deal as well, and as far as I can tell, had no problem with it. I would have expected better.) I think it is exceedingly unlikely such a clause is in OnLive employment agreements. Steve Perlman is a particularly honorable entrepreneur who has been involved in startups longer than a lot of HN users have been alive. He has nothing to gain by tarnishing his reputation like that. Much more likely this was just a company which ran out of money, has debts and liquidity preference far in excess of assets, and thus all common stockholders, including optionholders, are wiped out. Those who continue in a successor entity might get new options for future work.