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Comment by jdjjdflknfjj | Hacker News Reader

It sounds like an easy way to screw holders of common stock out of their money. Don't they have any protection at all? Like at least, does the agreement for "liquidation preference" have to be reasonable (like, they could go to court and challenge it, and the company would have to prove that it was a necessary deal)?

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Employees that are paid common stock didn't put any money. They are also paid decent salary. It is like playing a lottery, but only with opportunity cost. Not sure what needs to be protected here.

> Employees that are paid common stock didn't put any money.

> It is like playing a lottery, but only with opportunity cost.

So, they did put in money. It's "opportunity cost" money as opposed to literal cash, but logically it's still value being invested in the company (the company has $X more in the bank because the employee was willing to take a $X pay cut).

Compared to VCs, engineers are making a lot more of an investment in terms of % of their potential value for a less favorable return.

I think VCs get better terms because A) they control an amount of capital that's rarer and have more leverage, B) they do this professionally and are better at negotiating things. But probably mostly A?

This is why founders and employees should form worked-owned co-ops rather than be slaves to investors. If they absolutely need funding, look for angels, loans, convertible notes or ways to build slowly without giving away control to vampires.

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