What about the less sophisticated hires? Employees are trusting founders not to screw them over. I'd expect this piece to advise either: a) educating less-sophisticated employees, or b) increasing compensation for all employees that didn't get their equity grants before the term sheet.
This is something that founders should pro-actively surface and address ahead of a financing whenever and wherever relevant.
This is something we're working on advising founders to do. We want to do what we can to make sure that employees - no matter how experienced or sophisticated - get treated fairly throughout the life of the company.
My bad for the wording which seems to suggest otherwise.
Edit: We updated the wording as well.
> Edit: We updated the wording as well.
But the updated wording just says "some hires may realize this and you may then have to increase their compensation...". I don't think the problem being flagged was "you're implying that founders should screw over unsophisticated hires, when you should be implying that founders should screw over every hire they can, sophisticated or not".
> If you have any pending or promised equity grants you haven’t already taken care of before you start your Series A process, do that ASAP.
Huh? Seriously? If someone promises me equity I expect that finalized within weeks. How many companies just have promised equity sitting around without the paperwork being done?
Edit:
Some super good points about board approval. Most of the company's I've worked at have the rules of the options pool voted on by the board but the grants can be given out without board approval (as long as they were the standard new hire grant and nothing unusual). But I can see how if something like that isn't in place it could take a while.
The employment contract guarantees the equity subject to board approval. I'm not quite sure why people are making such a big deal out of this.
> The board agrees all new employees get X options with a 1 year cliff and 4 year vesting without additional approval so long as total options granted does not exceed Y.
The board only needs needs to be involved if X or Y need to be changed.
Having the board bother themselves with every little hire is just ridiculous. They have better things to do. Plus if the options are defined on paper the company can't be accused of favoring certain classes of employees differently.
An employee who fails to receive full compensation can receive free legal help from a range of organizations with very deep pockets. In many situations companies have a significant advantage, but in this case they really don't.
Sure, people and companies may be completely irrational, but competent legal advice will tell them to leave this one alone.
This is just pure dishonesty. I know folks who have said things like this and I A.L.W.A.Y.S. say "Sure for now send me a text message or email until we can get to documents." Sure enough I have never gotten a text or email or anything in writing.
People/companies who are serious will take an action and tell you exactly when (in the next few days) this will be handled and how.
This is so common that it's not even funny.
So on the one hand, every relationship of this kind (and of most kinds) requires trust.
On the other hand, you as an employee really shouldn't just be flat-out trusting your employers about things where you are technically at odds with them. Even if they have no intention of screwing you over, it's not always about them - they may be replaced by new management as the company grows, for one. Or they simply might not know something, for another - what if they're unaware of a certain tax implication around an equity grant, for example? Founders are oftentimes doing this for the first time, and just like most employees, don't necessarily know everything.
You should really make sure you are aware of all issues and implications of the contracts you get into, as much as is feasible.
When I raised it, I was told that's the way it works. "Grants are not finalized until the board meeting." End of story. I was a junior employee at the time and had no leverage because I had already been in the seat for weeks.
Not sharing for sympathy, just to highlight the reality: this can happen, and unless you get both the number of options and strike in writing -- or a commitment to make them equivalent -- there's a decent chance you will be screwed out of what you're promised.