[fourk]

First employee hired at a startup. Paid for my options before leaving the company. Six months later the company was acquihired by Google. Three months after that I was given paperwork informing me that those shares are now worth exactly $0.00/each. Founders made out well enough from the deal to pick up high-end luxury sports cars though, which is the important part of an exit, right?

[coffeemug]

There are a number of reasons this could have happened:

1. You left before any of your stock vested. Assuming a standard four year vesting schedule and a one year cliff, this makes complete sense. (Although you are saying that you paid for your options, so this likely isn't the case here).

2. The company got shut down, its assets liquidated, and the founders and a select group of employees went to work for Google. This is perfectly sensible from a legal/operational standpoint, but is really unethical if the founders didn't take care of existing stock holders.

3. The founders had liquidation preferences that employees didn't have. This seems really unethical to me, but it's also something you could have seen when joining the company by doing the legal diligence.

Bottom line here is do the diligence, understand the mechanics so there is no confusion as to what they are later, and, most importantly, make sure company founders are decent people who'll pick the high road if/when presented with a choice. I don't think I could live with myself if I had to look in my fancy, gold-plated mirror every morning knowing that I screwed people that trusted me to lead them out of what's rightfully theirs. Make sure you get a good vibe from the people you work for - nothing can substitute chemistry, character judgement, and basic human decency.

[danudey]

I worked for a company that got three offers for acquisition, all of which were talent grabs:

- One really high offer from a social network. Talks fell through.

- One reasonable offer from a relatively unknown company (which they took, good culture fit).

- One completely terrible offer from a major tech company, with incredibly high salaries afterwards.

The first one would have been the best for investors, and good for the employees, except the culture fit wasn't quite there. The second was a great culture fit, but wasn't that great for the investors (especially considering it was a cash-and-stock deal and the stock tanked). The third would have been a fantastic deal for the employees and a slap in the face to investors (which is why they didn't take it).

It's funny how easy it is to take the asshole route when it comes down to it.

[Retric]

'Paid for my options before leaving the company.' means #1 is irrelevant.

Chances are there was some issue with preferred vs common stock.

[billmcneale]

No, it's not uncommon for startups to let you buy the stock before it even vests. The company will buy it back if you leave before you vest (although you usually don't even bother since they are worth pennies).

If the OP left after staying less than a year, they most likely didn't vest anything.

[fourk]

For reference, I had vested the shares that I purchased.

[jpdoctor]

> but is really unethical if the founders didn't take care of existing stock holders.

Happens all the time. Usually it means that the acquiring company issued a bonus to those employees it was bringing across. If you're not one of them, have a nice day.

[Timothee]

A comment below tickled my interest and I did some quick googling. From the information available on the web, it looks like your comment makes what happened look much worse than the reality.

So I just want to point out to others that this is one side of the story and it lacks a lot of details to draw any conclusion and ask for the names of the "guilty".

edit: since I'm getting some downvotes, let me expand a bit: it looks like said-company wasn't going anywhere, that fourk didn't work there for very long, that the founders ended up being hired by Google, and it's not clear that the company itself was really bought. So, and again I don't have the whole story either, it's not as clear-cut as "execs and investors made millions and completely screwed a key employee out of his due".

[fourk]

I did not in any way expect this to be a serious windfall for me. I also didn't mean to imply that this was a windfall for investors (who were merely reimbursed), or anyone but founders (albeit a small one for them).

Also, while IANAL, that paperwork implied that the company was purchased by Google (at least technically), contrary to what Techcrunch said. Part of my reasoning for not wanting to name the company and founders was this exact reason: it's hard to get a full and complete picture of a complex situation from just one person through a couple sentences.

[Timothee]

Part of my reasoning for not wanting to name the company and founders was this exact reason

And I salute you for that. Don't get me wrong, I didn't mean to confront you or to expose the situation more than you wanted. (what I read is very easy to find anyway) It was more intended to the commenters who wanted names even though we had only your short account to go by.

Clearly, that kind of situations has happened to many startup employees (and will happen again and again…). I worked myself for a startup that folded, most people took their severance package and two months later the company was apparently sold. I don't think any of the employees really know the details of the sale, but I'd very surprised if it turned out that I had missed out on a big payout by not buying my options… :)

[blacksmythe]

  >> investors (who were merely reimbursed) ...

Unless the investors make money, no one makes money. This is almost a universal constant, even if in this case the founders somehow managed some perks (something I have never seen happen). It sounds like the perks are because they are valued as future employees, not because the business had any value.

There are plenty of cases of employees getting seriously shafted (investors made lots of money, but employees didn't). This is not one of those cases.

[danssig]

>A comment below tickled my interest and I did some quick googling.

You should be downvoted to hell for this stupid comment. You did "some quick googling" and now feel qualified to talk over people who were actually there? This kind of behavior is the plague of the internet. Someone who was actually present takes a back seat to a nerd reading the internet about it.

[Timothee]

You might want to calm down on the unnecessary attacks.

As I said in my original comment "I just want to point out to others that this is one side of the story", because some people wanted to have the names of the company and people involved to make sure never to do business with them.

On one hand, you have the (short) account of one person who was there; on the other, you have some information found on the web. Neither is reliable, they just give some hints at what might have happened. My comment was just pointing that out, since some people wanted to go do some public lynching.

So you see, in my opinion, your comment should be "downvoted to hell". I was careful to emphasize that what I found wasn't "the truth, the whole truth and nothing but the truth" either. Here's a sample: "it looks like", "this is one side of the story", "it looks like", "it's not clear", "and again I don't have the whole story either".

So no, I'm not the plague of the Internet. The unnecessary outrage and name-calling is.

[cloudhead]

Maybe you should let us know what the startup was, as well as the people behind it, so we can avoid working with them.

[fourk]

I'd prefer to be the better person here rather than defame them publicly. If anyone would like more information or to discuss this privately, however, my email is in my profile.

[tdfx]

I don't like that this position is assumed by default by so many wronged parties on HN. If you're really eager to take the noble path, explain the story as objectively as you can and let other people decide. Letting other people get burned when they easily could've learned from your experience is not a noble thing.

[Klinky]

I don't think it's really about being noble. When money is involved you don't know who is going to take offense with what you say. People with money or opportunity may not like the concept of you airing their or other people's "dirty laundry". It's also hard to verify information & a whistleblower can just as easily be painted as a hater/whiner or someone who has ulterior motives.

So shady people or companies continue to be shady because people don't want to risk loss of potential income or reputation.

[cloudhead]

I respect that, but maybe people wouldn't get away with this kind of thing if it was made more public.

[dbuxton]

It's pretty obvious that this is Scoopler, no?

[scoot]

It's only defamation if it's not true. And if it's not true, why are you posting it in the first place?

[davidhansen]

I'd prefer to be the better person here rather than defame them publicly

Idly allowing bad and potentially evil behavior to go unrecognized and unchallenged is by no means being a good person. Not to Godwin the thread, but your attitude is why evil flourishes, and on much grander scales than stock allocation.

[ynd]

He is a victim here, why blame the victim over the perpetrators? Makes little sense to me. As well as saying "evil flourishes"...

[forensic]

Victims do have the responsibility to report their crimes.

[danmaz74]

You mean "the crimes they were subject to" I guess..

[kinkora]

No, James is doing the right thing taking a more noble path and not publicy defaming the company. There is a time and place for that and these sort of discussions will not be conducive for the HN community. Talking about his experience will be what most of us be interested in.

Having said that, all you need is 2 minutes, google and you can easily deduce yourself what company he is referring to.

[_yobq]

An easier way to publish the info without defaming the company is to encrypt it with ROT13.

[waqf]

Encrypting with ROT13 does not cause you to be not defaming the company, either legally or ethically. (Encrypting with SHA-1 might, but I wouldn't bet your out-of-court settlement on it. IANALATINLA.)

[tlianza]

In this scenario it's equivalent to all of the founders quitting, shutting the company down, and going to work for Google, right? Ie. Google didn't buy / shouldn't own any of the company's assets?

[jpdoctor]

No. It is equivalent to buying the preferred shares at $X/share, which obtains voting control of the board, cutting the founders a check (not for shares), and zeroing out the common.

This is always possible with a company with a significant interest controlled by the preferred (which is another way of saying: a company funded by VCs.)

[asr]

I might agree with you, but we'd need more information to really know for sure.

A minute of Googling turns up TechCrunch speculating YC and other investors got paid back in this deal, in which case I'd say this is pretty sleazy.

[Timothee]

Why would it be sleazy? What if the investors got their money back and nothing more? Even if they got more based on preference, I don't see the problem.

That TechCrunch article doesn't really present the event as a great exit, but more that the founders were hired to move on from a startup that wasn't really going anywhere. (the post specifically says that Google didn't technically acquire the company)

[dlss]

You don't see anything sleezy about an employee who put in both sweat equity and money getting nothing for his stock, while other shareholders are reimbursed for theirs?

Seems both sleezy and a cautionary tale for those thinking of working at a startup from where I'm sitting...

[danshapiro]

The general definition of preferred shares is that they are treated preferentially to common shares. In the most typical case, they get their money back before the remaining funds, if any, are disbursed.

So no. There's nothing sleazy about a preferred shareholder being treated preferentially, necessarily.

[dlss]

Usually things like preferred stock and senior bonds are used to protect shareholders from bankruptcy, rather than acquisition.

When you issue stock to someone, you accept a fiduciary responsibility for increasing the value of those shares to the best of your ability. That fiduciary responsibility includes siding with their interests if and when a conflict of interest arises.

If the founders really did receive a large pay day while taking the value of their non-preferred stock to zero, then it sounds like that fiduciary responsibility was ignored.

So yes. Sleazy is an appropriate word.

[tlrobinson]

It sounds like Google hired the founders (probably with a nice signing bonus), and threw in enough money to appease the investors. The investors' terms likely included liquidation preference, so I'm not surprised you didn't get anything.

[rjurney]

Talent acquisitions only pay for the TALENT being acquired. You were not acquired, so you got nothing. There is no reason to be upset here. The founders did not do you wrong. They aren't as rich as you think, just flashy.

[lukejduncan]

So what was the legal/technical reason?

[startupcto]

Were you fully vested?

[fourk]

Fortunately, no.