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Definitely talk to a lawyer, one who knows about startups. NOTE: the lawyers for your startups represent the company, so don't talk to them - find your own law

by yumraj 12y ago

Definitely talk to a lawyer, one who knows about startups. NOTE: the lawyers for your startups represent the company, so don't talk to them - find your own lawyer. Other than that, AFAIK what you mention is not typical. Option pool should not be created by "taking" options from employees, but rather by issuing new shares which dilutes everyone equally. You should bring it up and ask that they create the option pool by issuing new shares which will at least indicate to them that you know what you're talking about and perhaps reduce their inclination to screw you. Also, what was your vesting schedule? If it was four years, you should have already vested 3.75%, which you can exercise anytime. If they take 4% of the remaining, you're left with just 2.25% to vest over next 2.5 years, which is just wrong. Also: before you begin negotiation, do understand your BATNA - Best alternate to a negotiated agreement. In other words, what will you do/can do if there is no mutual agreement. This will tell you if you're overall in a strong position or weak. This will include any advice you get from the lawyers, your employee agreement, etc.

Major_Grooves 12y ago
This makes the most sense here. Nobody creates new option shares by "giving up" shares - you issue new shares which create the option pool. Do you actually have a contract for your ESOP? It's common to not have one in the early stages since they are expensive to create. Maybe your founders don't really know what they are doing wrt to options - many don't.
alexatkeplar 12y ago
This is the sanest comment on the thread by far. You and your lawyer need to a) demonstrate to the co-founders that you understand how options pools are usually created, and b) understand by what mechanism the co-founders intend to dilute you disproportionately to themselves (see btown's comment for some ideas). The good news is that you are already probably 37% vested, and they have chosen to co-locate their operations with you, so you should be in a strong position to negotiate.
seanflyon 12y ago
When OP says that want to "take" his options, I think he means "dilute" his options. I'm not sure how they plan to dilute shares unevenly, but I believe it can be done. The simplest case I can think of is granting themselves a portion of the new shares but I'm guessing it's something more complicated like issuing more new shares from one class or pool, than from others.

by yumraj 12y ago

Major_Grooves 12y ago

This makes the most sense here. Nobody creates new option shares by "giving up" shares - you issue new shares which create the option pool. Do you actually have a contract for your ESOP? It's common to not have one in the early stages since they are expensive to create. Maybe your founders don't really know what they are doing wrt to options - many don't.

alexatkeplar 12y ago

This is the sanest comment on the thread by far. You and your lawyer need to a) demonstrate to the co-founders that you understand how options pools are usually created, and b) understand by what mechanism the co-founders intend to dilute you disproportionately to themselves (see btown's comment for some ideas). The good news is that you are already probably 37% vested, and they have chosen to co-locate their operations with you, so you should be in a strong position to negotiate.

seanflyon 12y ago

When OP says that want to "take" his options, I think he means "dilute" his options. I'm not sure how they plan to dilute shares unevenly, but I believe it can be done. The simplest case I can think of is granting themselves a portion of the new shares but I'm guessing it's something more complicated like issuing more new shares from one class or pool, than from others.