[greglindahl]

It's usual to pay ~ 10% to the people who are needed to make the deal close. The founders, who have common shares and/or options, knew the terms when they started. If you think any of this is unfair, don't take external funding.

[olliej]

I’m fairly sure the employees are important - you know, the ones who make the company have any value?

That said in this case someone took external funding, those “investors” took control of the company, kicked out basically everyone who would work for them (not the company), placed their own executives in the company. Changed the terms of incorporation to make sure that no one else got money. And then the people they put in charge agreed to sell on terms that again favorited only themselves and the VCs, finally the VC ensured that the people they put in charge got paid off nicely.

Meanwhile the employees who could not influence any of this - the founders choose the funding terms - got their prior income stolen by having their investment artificially reduced to zero.

The founders fucked themselves, but also all of their employees. Who I would bet were not told that their shares were going to be artificially reduced to zero value

[clips]

This is in no way typical (and 10% seems very high but it obviously depends on deal size). There will be certain cases where management carveouts are part of a deal, but it's far from the norm. Executives who join at a later stage also receive the same type of common stock / options that the founders have, and they typically don't receive much of an equity payout in comparison.

[greglindahl]

Just to be clear, I'm speaking about deals where no money falls on common, which includes the common shares and options held by all of the executives and employees needed to make the deal close.