[Tloewald]

I joined a successful startup about ten months before it was acquired for several hundred million. The deal somehow led to a lot of employees losing their options (myself included). There was some discussion of a lawsuit but it fizzled.

[BurningFrog]

Tell us more about "somehow"?

[Tloewald]

If I understood the details I would never have signed the contract. At the time I was pretty desperate for a job (I’d moved to the US from Australia and my own company had gone belly up and I was living in Santa Barbara with a mortgage).

[gammateam]

what needs to be explained, a several hundred million exit is LOWWWWWW. If they had a series B for 20 million or so, or a series C for close to or above 100 million, then the valuation itself was WAY more than that.

A few hundred million exit will result in ZILCH (almost $zero) for any common stock shareholder every single time, unless the company was in series A or lower.

VCs have a separate share class called Preferred, and they also negotiate "Liquidation Preferences" with a multiple. So a Liquidation Preference x1 means they get their money back, as much as possible. A Liquidation Preference x2 means they get double their money no matter what, before anybody else - like common stockholders - get paid.

And this is before your stock options' strike price matters.

Its a shitty deal, investor protection laws should be extended to cover this, because the information and transparency is lacking.

[Tloewald]

The exit was in 2005, and several hundred million was not bad (although it came after a failed effort to go public for somewhere north of a billion). I was very new to the startup game and had comparatively little at stake and didn’t understand any of the language but I was invited to some gatherings of engineers who had been screwed by the deal.

My impression is that founders or early investors often have a lot of ability to dilute the value of stock prior to making a deal (there’s description of similar shenanigans early in “Chaos Monkeys”)