[sharkweek]

If I'm an employee at [HIGHLY VALUED PRIVATE COMPANY] - this looks REALLY appealing to me, to dump my shares for at least a nice guaranteed cash out now.

So many VC rounds protected with liquidation preferences at a valuation that the market probably ends up shredding if there's an IPO or a buyer comes along to acquire the company. These latest devaluations certainly wouldn't help with morale and I'd get nervous thinking about my shares eventually being worthless if the company just sort of tinkers in the private market much longer.

I also tend to be relatively risk averse though, so I'm curious what others here would do.

[p4wnc6]

Most employees would be in a situation where right of first refusal means their employer would have to approve this -- and in a lot of places, the employer's going to take it as a red flag that you want to sell and it could create problems.

[state]

Could someone (perhaps with a throwaway or a 'wink') corroborate or elaborate on this? I'm very curious to know (anecdotally) how the politics of these sales work.

[joshjkim]

This is a copy/paste from a prior HN discussion that I had:

[it's definitely true] that employees are discouraged from seeking buyers because there is an unspoken implication that this means the employee is "losing faith" or "believes less" in the company, or is getting ready to leave.

If the party line is: "hey, we are going to be a billion dollar company!" and then one employee says "hey, I want to sell at this $100M valuation", even if the $100M is a solid upside from the employees strike price the next natural question for the founder is: "hey, why would you sell at this valuation if we all know we are going to unicorn?" Lots of people are reasonable and could understand many good reasons to sell at that point, but in high-growth culture those are not always appreciated. Sure, employee can/should suck it up, but it still makes it more challenging.

Generally, I think this is why company's should more regularly organize secondaries, it removes this dynamic to a certain extent.

[bogomipz]

And with each round of financing your equity is likely getting diluted. If you are a good employee and sell some shares on the secondary market and continue to do a good job and remain at the company I don't think anyone can equate that with losing faith or imminent departure.

[bogomipz]

See my comment above. There are no politics of it, just an irrational fear, call up one of these companies that specialize in it and ask. I found Sharespost to be very knowledgeable and helpful in this regard.

[maaku]

Doesn't the right of first refusal mean that company has the right to buy the shares (at the same price)?

Still not a wise thing to do if you're employed there.

[bogomipz]

Why not? I feel like this is a dirty secret and double standard at high profile tech startups - management and those with preferred stock regularly sell to the secondary market while the common workers are supposed to be wait for some distant pay day that may or may not arrive. Why shouldn't you be able to take money off the table? If the company is really that solid and the IPO is such a "sure" thing as you are lead to believe then it shouldn't matter. What I learned when I sold my options was that I was not the first and in fact the secondary market companies told they sold employee options before so it can and is being done. I don't think its a red flag at all. It means your savvy. I think that most employees aren't aware that this is even an option for them.

[p4wnc6]

Most people probably agree with you, but it doesn't mean founders or start-up execs will see it that way. And there's no way to know why they might cause a problem over it. It could be that they've seen a lot of people selling and view it as a bad signal and they just take it out on you ... or it could be that they are just psycho and see their company like a cult and suddenly you're "not a team player" if you want to sell shares.

People are far from rational about this stuff.

[bogomipz]

I get what you are saying but remember founders and execs need quality people to build and maintain a successful company. Its unlikely that you will be fired for this. I think if you went and told everyone within earshot that you did this it might problematic but if you kept it to yourself and did it discretely I think its unlikely to cause problems. Also like I mentioned ask these companies(and theres on a couple) if they sold options for your company before.

As far as psychos and/or the cult mentality, my view is that I wouldn't want to work there anyway but thats me.

[Silhouette]

If you have management that think like that, you might well be better off taking the money and looking elsewhere anyway.

[p4wnc6]

Yes, that's correct. The point is that your employer gets to be alerted to this -- not that they could block you or something.

If you're happy to sell the shares and work somewhere else, then there's no real problem either way. But if you actually like your job and you just simply prefer to realize a cash distribution from the compensation you earned in the form of equity, and your employer would disapprove of you having this preference, it can be a tricky situation.

[scurvy]

They can definitely block you. Right of first refusal clauses make no mention of timeliness. You notify your company that you found a buyer and they just ignore it. Supposedly this is very common with Uber. Only the selected cool kids and favorites get to sell.

I work for a YC company and wanted to sell some shares. EquityZen said it would be easier to sell if I didn't work there any longer, because suing your employer isn't fun. A lawsuit was going to be the easiest way forward.

Also take into account that investors only buy the big name hype companies right now. They're not buying anything small but with good fundamentals. Why? Because they don't get to see the books and why should they trust anyone at their word? But hype? Hype sells. This is the last time I work at a small, but slightly profitable startup that just drifts along. It can't go public and we can't sell. Except the founders who sold at series A.