Seems to me (as a startup employee) that downside protection and liquidation preferences should be required to be disclosed to all previous stakeholders (employees, prior investors, etc.).
as someone who has worked in startups for the last 10 years as always an early employee and disillusioned by it... the VCs think of you as replaceable unlike themselves... more money buys more power... you as an employee have only a single power - "quitting".
I get that incentives are misaligned between involved parties (VC's, founders, employees), but it seems very disingenuous to knowingly withhold this information.
Liquidation preferences are mostly there for the low exits -- the VC is trying to stop the founders from making ONE MILLION DOLLARS!!! by just selling it out right away for a low (but still very high for a pair of people) amount of money. I haven't found that this is a secret.
As an employee, you should assume that you aren't going to see much if the exit is low (no matter what the founders/VCs tell you).
I would also say that this is basically true for Angels if the company goes through a few more rounds and then fails to reach real exit velocity.
Does it needs to be asked? Isn't it transparency in operations and responsibility to people who believed and invested before in terms of effort or money? It is unbelievable, if they are hidden/undisclosed to remaining stakeholders.
2. Nonetheless, they have always delivered more than what was contractually obligated (in the form as a retention bonus at the new company or some other commitment).
In my case, both the startups were "sold" off to another larger holding. I personally, did not get anything worthwhile in a serious dollar amount so I chose not to exercise my options. Really, after the dilution your employee stock options are miniscule. And savvy startup CFOs will give employees small quantities of options not large.
EDIT: Yes, and these were not traditional Silicon Valley startups, they were NYC/Finance area startups. The original founders were not developers (your "bros"), they were finance guys!
Can't speak for all companies, but at the three I know about, the employee valuation is the audit (much lower) one. The stock an employee gets is a different class and it's not unusual for different classes to have different prices (they are actually different -- have different payouts)
no equity %. The savvy CFOs will not tell you what your percentage equity actually is. this allows the CEO/top brass to dilute the pool by issuing millions of options before the sale of the company to a buyer. Since I didnt work for a startup that went IPO, $ haul was 0. i didn't exercise the options, they felt useless compared to the effort I put in.
EDIT: also as a traditional employee (in my case developer), you will not be aware that your company is being readied for sale to another before it actually happens. Only, if you're a very tiny company like 10 folks maybe you can know. Otherwise a startup that grows from 10 to 100 or more, then forget it.
To clarify I was an early employee after a funding round and not before. Those who are employees before any funding round are basically "founders" and can get some sort of decent payout.
You don't think we did ? That's just silly to even think that employees who are more emotionally vested in a startup will forget to ask what their equity is. They don't tell you. That's the norm. Consider yourself lucky if you are told what your equity is worth. And it will be diluted to nothing regardless.