
Ask HN: I think my company might be selling. What should I be doing to prepare? - ta2121
Some recent events have led me to believe my employer is pitching the sale of our small startup. I have a small amount of equity in the company that is nearly fully vested. I know that its a long process and nothing is inevitable, but is there anything I can be doing now to be prepared for the exit in relation to my equity? I&#x27;m not concerned with being out of a job and prepping for my next gig but I&#x27;m sure others who find themselves in the same position might be.<p>I&#x27;d also love to hear anecdotal stories of sales from an employee with equity.
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commandlinefan
I've worked now for three separate startup/small companies in which I had some
measure of equity. In all three cases, they did some legal sleight-of-hand to
reduce that value to nothing. The first time it happened, I was outraged, and
researched my options to fight back (I had none). The second time, I was
hopeful but unsurprised when it turned out the same as it had before. The
third time, I rolled my eyes when they even mentioned "equity" and paid close
attention to the salary because I knew that was the only actual real money I
was ever going to get (I was right).

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opendomain
I have had this happen to me several times as well. This should be illegal

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commandlinefan
I think technically it is, but they count on the fact that it would cost twice
as much to fight them in court than you could ever hope to get back.

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gamblor956
If those actions constituted a tort, the court can award punitive or treble
(i.e., "triple") damages (depending on the jurisdiction), plus legal fees.

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byebyethepie
Posting from a throw away account - I've recently exited a company after an
acquisition. Employee payout was laughable: gourmet burgers cost more. There
were tears and terminations.

If you still think that you are in a small company, you are most likely going
to be screwed (imaginary valuation would come crashing down). Things to
consider:

1\. Verify if you have options on equity or actual equity. If you do not have
equity and you only have options, you need to look at your agreement to see
what happens to non-vested or vested but non-exercised options during the
liquidity event (It is possible that they get wiped out or they get bought
back by the company at some very low valuation). It is possible that you would
need to exercise your options ASAP.

2\. If you have equity and there's a sale in the works and you have voting
rights (not all equity has voting rights ) then you will get to see and vote
on the terms of the deal.

3\. If you have equity and voting rights and the terms look terrible to you (
but you think the other party _really wants for transaction to close_ and you
are OK burning bridges, it is possible for you to get better terms for your
shares than the general deal - a company may be willing to buy back your
shares even at a premium just to make you go away )

4\. You should presume that you will be terminated by the new company. Start
looking for another job now.

5\. Good luck.

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matt_the_bass
> If you have equity and voting rights and the terms look terrible to you (
> but you think the other party really wants for transaction to close and you
> are OK burning bridges, it is possible for you to get better terms for your
> shares than the general deal - a company may be willing to buy back your
> shares even at a premium just to make you go away )

This is great advice. Investors wouldn’t heasitate to do this. If you own
equity, you ARE an investor and shouldn’t heasitate either.

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funfunfunction
I worked for a tech startup for about 18 months before we were acquired.
Things weren't looking too well and a larger company in a similar industry was
looking to expand. Instead of building their own, they opted to acquire our IP
and five person team. We had several meetings with the senior leadership of
the acquiring company and from what they told us their company was a wonderful
place to work with huge prospects of success in the short term. They offered
each of us on the team a meager raise and large signing bonus, payable over 18
months. Fast forward a few months and I find myself working for a more
bureaucratic and mismanagement company that I thought could exist. Our small
team continued to operate as a stand alone unit for a while and were the only
team meeting our deadlines consistently. Eventually employees on other teams
started seeing that we were doing good work, had autonomy, etc and our team
doubled and then tripled in size in the span of just a few weeks. Managers
that had been with the company for a long time were brought in. New team
members brought there own inefficient processes from other parts of the
company and before long our team was missing deadlines and generally not being
productive. Once our products had been succesfully integrated into their
existing suite, I left. It was hard to watch such a productive team (which we
truly were) get destroyed by people who thought they knew best just because
they had a few years of middle management experience behind them. I feel like
next time a company is interested in acquiring something I'm working on I'll
have a much better sense of the type of questions to ask, e.g., what are your
current and historical retention rates? Will be be able to continue working as
we have and for how long? We were also told that the company had great remote
work options, and they did. Our team just wasn't allowed to use them. All in
all it was a interesting experience and I certainly learned a lot.

~~~
closed
Any chance you could cut us in on some of those questions? :)

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swagtricker
Be prepared to get a bullet any moment. When it comes to company sales, no
technical person is untouchable. Even if you "know" things couldn't be done
w/o you, they don't. That equity that is 'nearly fully vested' would do much
better in the pockets of founders who are fully vested and don't need to share
another crumb with a fungible resource. I'm not exaggerating, and not joking.
Anecdotal, yes: but layoffs to keep equity out of underlings hands do happen.

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aantix
If I had to do it over again, to better my chances of increasing my retention
bonus, I would have stayed at the job as close to the signing day as possible
and then threatened to walk a week prior.

During the acquisition that I went through, we were promised that everyone was
going to get great retention packages and salaries. At the end of the day, it
was stock that amounted to several thousand (lol, vested over 4 years!) and my
salary offer was the same. Completely laughable compared to the hype we were
fed.

I was living in SF at the time. The additional amount I was offered I could
have hustled part-time consulting and saved it within a few months.

I should have left.

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tastyham
I worked for a moderately successful startup that got acquired and I had both
options and grants. All vested options and existing shares were paid out as
cash. Unvested options and grants were then paid out as a cash bonus on the
vest dates if you were still working there.

Options were valued at sale price - exercise price. I had grants at different
prices, but on average the cash value was about double the original grant
values. I had been working there about 3 years. Also got a two year retention
bonus worth 60% of my salary at the time of acquisition. Didn't make me rich,
but it was a nice chunk of change. People who had been there longer had lower
grant prices and made a LOT or money.

There isn't really anything you can do besides exercise early to try to get
long term cap gains, but that's more risky than it's worth IMO, because the
shares could end up valueless and you're screwed.

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panda888888
Figure out what percentage of the company you own. Saying you have something
like 50,000 options is meaningless unless you know what others own. 50,000
options could be .001% of the company or it could be 10%. You have no idea.

They'll probably hate you if you ask to see the CAP table, but that's the info
you want. Don't be shocked if your options end up being less than 1% of the
company even if you were one of the first 10 employees.

Personally, I was part of a 15 person angel-funded startup that sold to a
private company for 30mm at the direction of a VC firm. They bought out all of
my options at full value.

I had less than 1% equity. I didn't get much money but got about enough to
make my salary what it would have been if I'd been working for a bigger
company. That's it, but it was about what I expected and seemed fair given how
my salary/options were presented to me when I was hired.

Once sold, the new company will either fire you pretty quickly (within 6
months), or will create some silly incentive plan to try to get you to stay. I
stayed on with about a 20% salary increase, which brought my salary up to the
market rate for a big company. I was happy with this agreement.

Be prepared for a lot of office politics and difficulty integrating with the
acquiring company. This will be the hardest part. It's substantially more
complicated than the financial part of the sale.

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davidw
You probably won't get anything much. Start looking for another job.

~~~
jpm_sd
Indeed. The one close friend I have who participated in a successful sale of a
startup said it made him a "thousandaire", so best to adjust expectations
accordingly.

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gaius
I have been a participant in 3 liquidity events. Each time amounted to 3-6
months of my then-salary. A nice bit of cash but hardly life-changing. And far
from the promises any founders ever made... and the first one was less than I
got in severance from that company a year later...

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abstractbill
There aren't very many concrete things you can do at this point. All I can
come up with is:

\- Find a good CPA if you don't already know one, just in case your equity
turns out to be worth something

\- Consider carefully whether you would stay (and for how long) if you were
offered some kind of "golden handcuff" deal

\- Start thinking about what you would like to do next

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mdb333
Shareholder/liquidity preference is very important... for example if you are
VC backed and there are multiple classes of stock, eg. common vs preferred,
you will probably find that preferred stock holders have payout preference.
Even if you own a large chunk of common stock the purchase price might not be
high enough to take care of preferred stock holders with any significant
amount of money left for common shareholders. Generally, at a certain
acquisition price preferred stock is converted to common and all shareholders
treated equally.

Best thing is to have someone review all your stock agreements and such.

Anecdotally, the last company I worked for was eventually acquired (long after
I left) for low 9 figures. Turned out the price was just enough to pay back
investors and other shareholders got nothing... I imagine that felt pretty
shity for folks who spent years building "equity."

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bri3d
I went from full time to contract and failed to exercise vested options
shortly before a startup I worked at exited. However, as usual the upside
wouldn't have been very lucrative anyway after dilution and preference. I was
hired and stayed at the acquirer where we have been given great autonomy to
grow into a much larger organization, as well as good pay.

In most cases I suspect your upside as a higher ranking employee at the
acquirer will be far more important than your upside from the exit itself. If
you are interested in the acquirer you would do well to position yourself to
get a good role there.

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ivan2kh
I would suggest prepare for the interview. It could be internal interview on
presale of your company. Or they could fire you and you will have to find a
new job.

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pattisapu
Legal advice would be useful, at least in conjunction with any other advice.

Some lawyers charge a flat fee for a one-off consultation about questions such
as yours in connection with a potential separation employment, including the
"small amount" of equity you've got, any potential agreements or restrictions
you may be under, etc.

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jackgolding
Seems like every comment at this stage is about getting shafted when your
startup gets an exit. Other than supposed the lack of politics and more
bleeding edge tech - what is the point of working at a startup if you aren't
looking for an exit? (Especially for early hires)

~~~
emmanuel_1234
This is the unfortunate reality. I work for startup for the fast pace,
everybody-gets-to-do-a-bit-of-everything environment, but I surrendered my
hopes of making an exit a while back (after being burnt, like many here).

For most intent and purpose, the Exit is mostly a legend to get very cheap and
motivated labor to join in, it's important to see beyond it.

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justherefortart
Cash is king. Get cash. Don't sign over your equity without a lawyer and or
accountant reviewing to see how you're fucking yourself.

I had many friends in the Bay Area get screwed on shit like this. Good luck,
your'e screwed! :-)

