Ask HN: How often startups get acquired and you get nothing?

The dirty little truth is that the only parties who profit off of startups, besides service providers who cater to them, are the investors and the founders.

If you would believe the hyperbole from the founders of start-ups, working at a start-up isn't about money. It's about changing the world. heh. Seriously, working at a startup is about making 20-30% less than market (when you factor in the value of big-company benefits) with the expectation of 50-70 hour work-weeks for the gamble of your company having an exit so huge there's no way they can dilute your stock enough to give you the shaft. Youtube was the last time that happened. If the exit isn't in the 10 figures, as a peon you probably won't even see enough cash for the downpayment on a studio condo in the bay area.

This is what happens when you are just an employee. This is also why I don't work for startups. You work long hours, many times are under-paid, and after putting your life unto a project, get little to no money if it gets bought out or they go big (you also might just get fired instead).

This is why you need to start your own company.

This happens more often than not. So many things could have influenced why you got next to nothing in your stock options. Depending on how much money was taken by the company, your stock options that you received on day one were likely diluted over and over and over again. (Whereas, investors likely kept their percentage of the company by maintaining their stake). It's the unfortunate part of the investment game. Employees (and employee stock option pools) often are the last ones to benefit from the dilution.

It has to do with dilution and something called liquidity preference. If an investor puts in $5 million and has a 2x liquidity preference they get out $10 million before anyone else. That happens to every investor on down, whatever is left is then split among the common stock/options holders. There was likely nothing left or what was left was less than your option strike price.

exactly.

Out of curiosity how did they devalue your stock options?

There is a real value in working for a start-up as an early employee, for sure, but you should only really be doing it to watch & learn from others mistakes.

If you've got the chops, take 3 months, make an MVP and see what offers you can get. Sounds like you've managed to survive the environment twice around, so why not take the plunge?

Always assume "equity" has zero value. Any payout will go to the investors first and the founders second, with employees benefiting significantly once in a blue moon. If a blue moon shines, hurray! But don't plan your retirement on it.

I'm sorry to hear about your situation. Being in that position sucks. I'm always an advocate that you reward people accordingly for what they have done; particularly the early employees who were there from the beginning.

If it's possible, could you elaborate more? I.e. was your shares were diluted to nearly nothing, preferred/common stock, VCs screwed the whole company, etc.

I'm sure the HN community will be interested to learn from this and take measures so that it doesn't happen to us in the future.

I'm not sure I would lay down so easy. I think at the very least you should have a your own lawyer look at your options and see what conclusion he/she comes up with.

I do agree with some of the others that this type of stuff happens more often then you think. Personally I'd be interested in know who the investors were and who the executives were. This could perhaps save some other developers from making the same mistake.

Sorry to hear about this, good luck.

I did some digging to find out who the company is, and the investors are fairly minor ones in the startup league. One is a cleantech vc and the other is a Seattle based PE firm that invests in later stage startups.

VCs look at people not ideas for a reason. I think joining a startup as an employee should be the same exact process. Do you believe in the executive team to put your needs at the same level as theirs? If not, then you may want to reconsider. At the end of the day it's an question of ethics.

>"Whole top management being replaced (CEO, CTO, etc),"

That's probably relevant evidence regarding the value those people placed on their stock options and/or the attitude of the controlling shareholders regarding the value placed on early hires and founders.

Stock options usually vest at 25% per year. If they don't, then they're only worth anything if the company goes public, which is unlikely in today's environment.