Key startup employees: how was your retention package at exit?

New bricked
Jun 10 22 Comments

I’m in the position of being a very early SWE at a startup (employee #3, startup is now 270 people) that might have a successful exit in a couple years, and I’ve been advised from various people (outside the company) that I should stay until the end because there will likely be an additional pot of gold to be split among key people like me, regardless of the final valuation.

I have a very good relationship with CEO, CTO and several VPs and they highly value my work, but I’d also like to have an experience at FAANG (I have standard offers at FB E5 and Netflix).

Have you ever had this experience? Would I really leave a bunch of money on the table if I left before the exit?

Consider I already have a bunch of equity under the form of vested and exercised options because I’ve already been here a few years. My equity on paper is worth about 4M and I would bring that with me if I were to leave (startup valuation is 500M at the last round, I originally had 2% that went down to slightly less than 1% due to dilutions).

A few friends experienced with startups told me it’s not uncommon to see amounts of 1-5M being thrown at key employees on top of the equity cashout, as a retention package to have them stay a couple years after the acquisition.

If it wasn’t for the money, I would be 100% out of here, since my growth is stagnating, and I’m feeling the opportunity cost of waiting for the carrot stick.

Thanks

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TOP 22 Comments
  • Salesforce benimeoff
    There is no question that if you are acquired and seen as ‘critical’ staff you can get a big payday on top of the exitable event. I have seen this as 0, $250k, up to millions so it is a wildcard. The real question is would the CEO/founders drop your name and fight for you in negotiations to be sold? The reality is if you try and leave and they dont make a big fuss, they wouldnt look out for you in form of acquisition retention outside of whatever standard deal they put in place. Make sure you have read your ISO stock agreement if you decide to leave. Whole lot can change once you leave even if you are vested. It can be common to have a timeline in which you would need to execute options or forfeit them which can be shitty if the company isnt exiting...
    Jun 10 8
    • Salesforce benimeoff
      I have worked at a lot of startups at every valuation, sounds like you are in a great spot. If ‘boredom’ is your problem, what about working on a new business idea outside of work or ask CEO to work on new product line? Big tech is more boring and slow then any startup...dont fuck up your golden ticket
      Jun 10
    • New bricked
      OP
      Yeah. I’m just worried about waking up a couple years from now and see exactly 0$ coming from the startup (since it could completely go belly up), compared to the 450k FAANG is offering me right now, in addition to surely more interesting work (at least for the first year or so, since I have to learn entire new systems).
      Jun 10
    • Salesforce benimeoff
      Ya, I have been ‘super rich’ on startup paper twice and got 0. BUT at your investment stage I made sure I was getting higher then market rate base, have that discussion with your leaders if this is all about money. People always see the startup end result and don’t realize the grind to reach it...
      Jun 10
    • New bricked
      OP
      Can I ask what went wrong in the two occasions that you went from paper rich to $0?
      Jun 10
    • Salesforce benimeoff
      Without giving too much away. 1 of them was a key investor was up to illegal dealings and in turn screwed up our next funding round (unrelated to the company). Another was later stage more like your company and shit just hit the fan. A lot of key people left (with your thinking that the ‘work was done and I will get my check’). This created some issues which then aligned with some tough breaks from big fortune 500 contracts we had and things fell apart. Both scenarios in my opinion our revenue did not justify our valuations and major events made that more apparent... bottom line, nothing is easy about the big win startup exit, too outsiders it always looks like a mill/bill aire ‘overnight’ when in reality is was a 5-10 year grind of trading sweat for a lotto ticket...
      Jun 10
  • VMware / Eng zxzam
    Stay if you still enjoy being at the startup. You’ll likely miss the autonomy and pace you now enjoy after moving to a much larger company.
    Jun 10 1
    • New bricked
      OP
      That’s a good point, though I’m really looking forward to new challenges, and I sort of peaked at my company, I basically spend all my time training and mentoring others, which is not as rewarding as tackling new problems.
      Jun 10
  • Zillow Group uYVG45
    Are you sure there are no more opportunities left where you are? A company looking to IPO in a couple of years surely would have interesting opportunities it's still going after as it works towards an iPo. Being #3, you are in the best place to grab those. You won't get such opportunities at FB or Netflix
    Jun 10 1
    • New bricked
      OP
      Yeah. We’re not a sexy unicorn, to put it bluntly we are a boring b2b enterprise startup which is mostly dominated by sales people these days, the tech is pretty much done and we are in super conservative mode when it comes to innovation. Sales is where the action is at these days.
      Jun 10
  • Dropbox / Eng EGmQ80
    If you get acquired by a shit company, they can actually unvest your vested shares and make you stay to re-vest. Seen it happen, not sure how it was legal. Definitely YMMV. Also additional pot of gold can be tied to aggressive revenue targets. Depends on how your founders negotiate.
    Jun 11 1
    • New bricked
      OP
      I’m really curious how the re-vest part can be legal: and what happened to the employees who left and brought equity with them? They sure cannot make them revest, so did they just find a way to cancel their equity?
      Jun 11
  • Airbnb New999hire
    Don't leave yet. Facebook, Google and Netflix will be around forever. This sounds like a once in a lifetime opportunity.
    Jun 10 2
    • New bricked
      OP
      Once in a lifetime opportunity that has already lasted 4.5 years..... I’m so bored!
      Jun 10
    • Salesforce benimeoff
      Realize that average exit time is typically 7-10 years, so you are possibly only half way. If thjs is about money why not talk with founders/ceo frankly about this? If you are critical I would think they would make this right or want to work to get you the exp you are after. You are in a way better spot at this startup then being 1 out if 1000 hire at FANG
      Jun 10
  • Amazon / Product Kristoff
    Why don’t you try to get an offer outside, do the math, and if you have good relationship, share this with your founders? I think you can make them part of your decision making and raise your concerns about wanting liquidity. Tell them you need to buy a house, provide for family, etc etc. Also, you probably already got bulk of the benefit and the retention may not be as high as you think.

    Question: is 2% seed stage equity?
    Jun 10 3
    • New bricked
      OP
      Thanks for your comments. Yes, 2% was when I joined, right after the founder secured the seed stage. I should have asked for more but I just had 3yoe at that time.
      Jun 10
    • Amazon / Product Kristoff
      If you end up leaving, make sure you hire a lawyer to review your docs and have everything in writing. Costs around 200-300/hour and will give you some sense of security.

      What do you think did the YOE 10 at Seed stage or Series A got? I’m in that current situation, thanks again!
      Jun 10
    • New bricked
      OP
      For seed you should probably get 3-4%. Series A 1.5-2.5%. Most wont, but realistically anything less than that is lowball if you’re going to be very early.
      Jun 10

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