Comment by ditonal | Hacker News Reader

Comment by ditonal | Hacker News Reader

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Gusto (people being interviewed) formerly known as ZenPayroll, fired an acquaintance about a week before their options vested.

Now they are trying to educate people on equity? You would need a full-semester class to explain the many ways in which VCs and their "startup" cronies can screw you out of compensation (e.g, dilution, selling at a low price and then using staying bonuses to kick in liquidation preference, 30 day exercise windows making it financially prohibitive to exercise, etc). Do companies even IPO anymore? If Uber still hasn't gone public, when do you think Gusto is?

If these companies actually wanted us to value their equity, they would reimburse independent corporate lawyers to review the contract.

Higher profile people like Zach Holman are already speaking up. It's going to take a while, but I already see programmers realizing that the smart move is either being a founder or going to work for GoogMicroAppleSoft. It's still to be determined whether the VCs will finally realize their inability to hire is their own damn fault and fix equity.

Only the naive and the financially illiterate accept these equity offers as worth anything.

> If Uber still hasn't gone public, when do you think Gusto is?

IPO is only one of the exit strategies available, acquisitions being another one (selling to the private market being another one, etc). A company doesn't necessarily have to IPO in order to return a value to its shareholders.

Unfortunately, an acquisition isn't necessarily all that valuable to employees.

How do you figure? If they've vested they'll make cash.

Not guaranteed. If you exercise your options at company X, say $20 per share, left company X, and company Y buys company X for $10 per share, then you just lost money.

I imagine this is pretty rare but it's possible for a company to acquire another and strictly buy all preferred stock instead of common stock and then all employees get nothing [0].

[0] This happened to a friend of mine where all execs had preferred stock and were totally fine selling the company and screwing over the employees. Make sure your founders/execs have common stock so that everyone is on the same playing field...

This actually happened to me during the first bubble. A large, public company acquired a former employer for less than the most recent valuation. None of the common stock holders got anything. Some of the preferred holders were paid out.

Wrong. Have you ever been part of an acquisition? More than likely you are given stock (or options, if you're still vesting) in the acquiring company. This can happen several times over, as your acquirer is acquired. You may, infact, never make any cash...

Seems like a poorly negotiated acquisition if your employees don't get anything of value out of it. Hell of a way to encourage work.

Depends on who's point you look at it from. The investors and the founders get to make out pretty well, so to them it's a success. The acquiring company doesn't have to pay a lot of employees actual money, and they give them something which handcuffs them to the company for a while, so to them it's a success.

It does leave a bad taste in employees' mouths.

When I left my last company (which acquired the startup I was an early employee at), I did exercise most of my options (all the ones at the lowest strike price.) Just in case. It cost me about $5K. Maybe it will amount to something...

Or you may make even more money if the acquirer is a public company and you know when to sell. Stocks are an opportunity that can accelerate your net worth by a double digit multiplier if you, as an employee, know where to bet your time and expertise.

Well knowing is obviously impossible, it's a bet for a reason. Actually knowing is most likely insider trading.

How do I determine where to bet?

Best thing to do is diversify, moving on every few years.

No, but being a public company makes it a lot easier for employees to exercise and sell stock options.

I'm sincerely surprised that they did this. My understanding is that termination so close to a substantial vesting cliff opens you up to potential lawsuits.

Most people don't know any better.

I once gave notice to a startup employer before my vest date, where my last day would be after my vest date. My performance up until then had been (by their measure) exemplary, but they tried to move to terminate just before the vest date.

That was a phone call I won't soon forget, especially the part where they admitted over the phone that the termination was motivated by the vesting event.

Suffice it to say, I kept my original last day.

Many startups behave in sketchy ways on the premise that their employees are rubes who don't know any better. And in 95% of cases, they're right.

What laws prohibit such a termination?

No explicit law - a termination in this instance would not be intrinsically illegal.

But it opens up the company to legal liability - the combination of absolutely no records of performance problems, no change in needs of the company, as well as the very obvious motivation to avoid paying a contractual payout, makes this a gaping liability hole if someone wanted to bring suit to the company.

For the record I never even hinted at suing the company, my impression is that this muscling-out move was done by the CTO and once HR caught wind of it they put the kibosh on it. As for why the CTO did it, I don't think I'll ever know - it may have to do with him trying (and failing) to leverage my immigration status (H-1B) to keep me at the company.

> Gusto (people being interviewed) formerly known as ZenPayroll, fired an acquaintance about a week before their options vested.

So what? That was a deal both parties agreed to. Implicit was the caveat that your future EV to the employer has to exceed the value of the options that would vest. Why should they pay you money if they don't want to?

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