Hacker News Reader

Comment by gruez | Hacker News Reader

>Common stock was worthless [...] Execs got between $1MM and $10MM in cash.

What's the mechanism for this? Were there dual class shares for executives? A bonus for the acquisition?

Pre-IPO investors always get their money back first, this is a straightforward defense against founder fraud - effectively meaning that the valuation of the company has to go up before a sale, not down. If it goes down, the founders have lost their gamble and the round should not have happened. The legal machinery for this is - each Series of stock is a custom negotiated contract and can have any number of custom terms; shareholders and/or the existing board have to consent of course. If existing board doesn’t like the terms, then don’t do the deal. The exec comp here was for retention and can include their retention salary - i.e., the $1M can simply be $250k 4 year comp and nobody is allowed to leave.

What kind of acquihired exec from a failing start-up gets a guaranteed $10 million employment contract? That's really...something....

The CEO, now VP, was a university professor at one of the best programs in the world in a topic that’s extremely relevant, and had collected a lot of engineers and researchers who were skilled in this specialty

The engineers were largely Chinese, so I suppose they didn’t have much choice getting shafted on their common stock, and from what I’ve heard from other engineers, the offers weren’t extraordinary compared to similar positions at peer companies.

10 million is stretching it, but it's not uncommon for failed startups to get acquihired (their tech/customers are still valuable for another business) and the founder know-how is valuable for making those assets productive. So them getting guaranteed jobs with salaries is completely expected.

1 million over 4 years is not crazy depending on position.

$1 million over 4 years I can see...but original post said it went up to $10 million for some execs....

Reply on news.ycombinator.com