Founders don’t want to sell
Company had a really good run, grew exponentially (now 120 employees) and was able to secure pretty solid rounding at a reasonable valuations. However, growth is now slower as the competition caught up, and we have massive execution/quality gaps. It would be the perfect time to sell the ship and probably cash in 200M valuation, which would make the founders super rich, and early employees like me would get low 7 figures (I am fully aware of current cap table, dilutions and all that, I’ve been kept in the loop). However, the founders are instead doubling down and want to turn things around and move into the 1B valuation with a plan that consists in keeping the company around for 3 more years and make 5-10X more revenues than now. I’m in despair. I can’t leave because I would have to pay too much to exercise my options, and there is no secondary market for the equity.
Form a union
Perfect strategy to get fired and lose all my equity. Alliances/unions just don’t work in tech, people are too self centered or naive or greedy.
Then they'll have to fire everyone. That's the whole point of unions.
Find a new company that is willing to give you a signing bonus to cover your options.
I’m talking about $500k+ between cost of exercise and amt liability (amt is really the dominating factor). I was really really early so all the appreciation from ~0 to 200M is counted as AMT. Never heard of companies giving that much POST tax for a rank and file engineer.
Sounds like you should have been saving and now you’re realizing that failing to budget has consequences. Best of luck.
How are you 'in the loop' if you can't discuss this directly with the founders?
Because at every investment round I hammered them with questions about the details of the round and they also let me see the cap table a year ago. I expressed my concerns, they just dismissed it and say I’m too pessimistic and things will turn out great. In the end I’m not an executive.
Classic problem of any startup .. nothing for you to do .. if company is planning another trajectory.. u r not a major stock holder ..
Yea :( I’ll be much wiser next time. I hate not being in control like that. At least if I was at another company I’d know exactly how much I stand to lose if I were to leave. Here it could literally be anything between -$500k (if I exercise my options and then the company goes bust) and +$5M
You are screwed. Got to ride it out
This is a common situation. At one point you need to move on. You’re not a founder. Exercise a few options and move to another company.
Do you think their plan is realistic? Also how significant is it if you left? Be realistic here, is your IP enough to cause a significant drop in revenue or customer satisfaction. If your IP is nothing to the company and you're just a code monkey then all you can do is leave. If you have a significant contribution into the product then you should talk to the owner about some kind of buy out or some kind of separation agreement.
I’m not a code monkey but at the same time if I left business would continue as usual, little disruption overall. The problem with leaving as I was saying is that I have $500k+ to shell out to exercise my equity and pay amt, that’s why I loathe these founders for not selling.
Well the problem is you don't have much leverage and the 500k isn't truly yours in the sense that it is a promise for joining a startup at a lower pay that you can exercise it in the future. The founders have no obligation to sell and you rightfully feel you have been tricked and that's kind of the nature and risk of taking equity as a regular worker in a startup, either your equity gets ipo, bought out, or most likely worthless and company eventually goes belly up or sold at a discount.
Ask the founder to give you longer exercise period after leaving, like 5-7 years. Doubt they will grant that to you but won’t hurt to ask. I lost $3M+ on paper money from my last startup :) btw.
That’s a great advice
No harm in asking... assuming you’re ready to walk. Note that the board can be concerned about precedent setting unless they’re open to revising the terms for all employees.
I’m not in business. I’m just a normal rank and file engineer, but I was very early so I have a boatload if options, but I’m still just a normal swe.
And therein lies your problem. You could have been working in fang and been an investor and gotten preferred stock not to mention access to the real cap table, not the BS one they feed you.
Voice this concern to the founder and ask for a secondary liquidity opportunity for employees, make them realize it’s a concern for many and if they don’t provide some liquidity, they won’t have a team to get them to 1b