

Ask HN: Option to invest as a condition of employment? - johnrob

A question for founders: what would you think if a prospective hire agreed to accept a position on the condition that he be allowed to make an angel investment in the company?<p>To clarify, in addition to the employee getting X salary + Y amount of stock (vested over 4 years), he also gets to purchase Z amount of stock immediately (at the normal investor price/terms).<p>Here is the background for such a question: you've saved up money for the purpose of funding your own startup, but before doing so you get an interesting offer from another company.  Unfortunately, the company is later stage than you're looking for (i.e. raised money and paying salaries to employees).  This is a way to take the savings, and become more founder-ish in the new company via increased ownership.<p>Thoughts?
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frossie
_What would you think if a prospective hire agreed to accept a position on the
condition that he be allowed to make an angel investment in the company?_

This is SO not my world, but since comments so far have been on the negative
side: I can't actually imagine what the downside is in asking. They will
either say yes or no. If they say no, you presumably have the choice of
accepting the employment anyway or walking away. Provided all the negotiating
is done courteously, I'm not sure what the problem could be.

I guess there is some scenario whether they are so shocked and appalled by you
asking (an Oliver Twist moment) that they would withdraw their employment
offer completely, but would you want to work for them if they are that touchy?

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johnrob
You are right about just asking. Still, I wanted to get a sense of how
unreasonable such a thing would be.

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jamesshamenski
I've done this with my last startup and also have seen this happen on two
addition occasions with new employees putting in 6 figures each.

1\. Funding is usually open for employees to participate. Founders love taking
money from employees rather than VCs.

2\. VC's like this because the team is invested to win. No, they love this.

3\. Be like a VC and be diversified. Don't put all your eggs into one basket.

4\. putting in new bucks likely won't bump you up close to founder-ish levels
of equity.

5\. Timing has a lot to do with this. Don't force the issue if any tension
arises that can take away from your core responsibility of doing a good job.

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ADRIANFR
This is very unlikely to happen because: 1\. When a startup sells shares
(i.e., you purchase stock) it sells them not only for money, but also for
advice and connections. Most of the time these are more valuable than the
cash. Since you are likely (only) an engineer/geek, your part of the deal is
short. 2\. Even if they would want your money, evaluating a startup's worth
(for pricing your shares)is extremely difficult and/or expensive. So the won't
go through this process for a few thousand dollars.

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johnrob
Everything has a price. If the seller doesn't want to sell, it just means the
price is too low.

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ADRIANFR
Technically you are right, everything has a price. Except when that price is
way too high. So if you think a share is worth between say, $5 and $10, they
can either say (nicely) "we're not selling shares right now", or say (rightly
and rudely) "we can only sell YOU shares for $1000/share". And that may really
be a fair price from their point of view, since having you (a nobody in the VC
world) as an investor is really detrimental to their image.

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staunch
Unless it was a significant amount for the company, or they were already
raising a round, my guess is most would decline.

Definitely a reasonable thing to _ask_ about. Any employee that wants to dump
his savings into the company is probably going to be pretty committed.

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michael_dorfman
Stock options may be taxable, depending on your jurisdiction.

Talk to your lawyer/auditor.

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johnrob
Not sure why that applies... The stock options here (Y amount vested over 4
years) are no different than the ones you'd get at any company. The
interesting part is the Z amount of shares bought at full price.

