

You Got To Be In It To Win It  - cwan
http://www.avc.com/a_vc/2011/06/you-got-to-be-in-it-to-win-it.html

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sanj
The idea of the repurchase being at the current fair value (perhaps via the
most recent 409a analysis) strikes me as being fair:

\- the employee _was_ in it to win it and would be able to walk away with the
amount of win that accrued while they worked at the firm

\- the company retrieves the wayward stock to keep the cap table clean

The tricky issue is which valuation to use in lieu of a secondary market.

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abarth
That approach appears to provide an incentive for employees to leave so they
can liquidate their holdings.

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sanj
True. So the employee has to believe that those options will be worth more in
the future if they stay. That seems like an entirely appropriate challenge for
the company.

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bhickey
Not sure how legally feasible this is...

Suppose the (ex-)employee sells the company an option on his options.

If he exercises prematurely, the company sits on its option and the employee
can't flip the shares onto the secondary market. When the company exercises,
the employee is compelled to exercise to cover his position. Figuring out the
strike price on the options could be tricky, but it removes the incentive to
quit and force the company to scoop the shares.

