Suppose I have 1% equity vested over 4 years with 1 year cliff, what will happen to my stocks?
The company started in June 13, so none of my stock options are vested yet. I have read about single trigger and double trigger but couldn't fully understand it.
Its a cash-stock deal. Do I get any cash out of this aquisition?
On all my share option deals I specifically ask for an instant vesting on a sale/listing event (i.e. we get acquired or we make IPO, I don't need to wait any longer), and when requesting it I normally get asked for an agreement to do a work-in on acquisition - it means the acquiring company is not obliged to, but may, have me work on their team for a year or two post-acquisition so the stuff inside my head doesn't walk on me becoming rich overnight.
However, this is not standard to my knowledge. I have always had to ask for it. Did you? Maybe it was put in place by your employer, maybe it wasn't.
So, read your paperwork, ask your boss, go and seek out professional guidance with your paperwork in tow if you need to.
Good luck, and (hopefully!) congratulations!
It all depends on what your stock option program says. Both of the times I worked for someone else, all options automatically vested on a liquidity event. A liquidity event being the acquisition of the company. This seems pretty standard so it may be the case for you. I don't want to get your hopes up because it depends on your stock option program
That being said, the first acquisition I went through, the acquiring company purchased the IP and not the company. The board of directors declared that this didn't count as a liquidity event. Therefore, none of our stock options vested . We all still received 6 figure retention bonuses in cash and stock from the acquiring company that vested over so many years.
tldr; It seems pretty standard in the industry that your options would automatically vest on an acquisition. Even if they don't, it's likely that the acquiring company will offer you some kind of bonus to continue working for them.
You can also now negotiate market level salary or a loyalty bonus to stay and ensure smooth takeover/handover. You are likely to get more this route than via your equity if you have 1%.
What does your employment agreement say? Depending on the terms you'll have either 0%, 0.2%, 1%, or some other amount. Really hard to say anything without knowing what's in your employment contract and the types of stock you were issued.
> Its a cash-stock deal. Do I get any cash out of this acquisition?
Again, you'd have to read the terms of the deal. They might pay back the investors at a multiple, and split up the rest to the employees. And it's possible what's left for the employees could be very little, nothing, or a lot. It's really hard to say without any information.
If I were you, I'd read carefully through all the employment forms you signed. And if it's overwhelming, you should have a lawyer read them over to gain a bigger understanding.
Just know that 1% equity doesn't necessarily mean 1% of the deal. It all depends on the terms and the class of stock issued.
Otherwise, if you're lucky, you might get a job at the acquirer with a salary bump.
1. What was the strike (and market cap/valuation) when you got your options?
2. What was the acquisition price per share? How many shares are outstanding?
3. How much did you get diluted when they raised money? Include liquidation preferences.
4. Is there any accelerated vesting clause on acquisition? Can they fire you and you get nothing? The fact that they haven't tried firing you to cheat you suggests your options aren't worth much.
Lesson for next time: When you are offered options as part of an employment agreement, ask for a written contract and ask for details! Even if you do have a good written agreement, you can still be ruined by liquidation preferences given to new investors after you join.
So usually there's some sort of clause that requires the employees/founders to stay with the company for some time before fully vesting.
Employee retention defaults to being managed by notice periods and other contract conditions being inherited from the acquired entity, after that the new owner and the employees need to negotiate (unless "keep as you are" is what both parties want at this time). If you are on one month notice or less start looking around just in case, if you are on six months you have plenty of time to plan if things do look like working in a way you are not happy with.
Sometimes, again for key people, the negotiations happen as part of the main dealing before the purchase (after purchase we'll X if you Y and not Z) by proxy (the acquirer can't directly dictate anything at this point, but they can say "we won't buy unless Y+Z is agreed, we promise X in return for Y+Z if we do purchase" to the prospective purchasee and they then officially negotiate with the employees).
It is about the IP. If you are directly and visibly important to the IP then you are important to the purchaser and have a good negotiating position. The buyer knows this and it will form part of their negotiation plan (to make sure they have a viable business after purchase) so unless they are buying to silence competition they are unlikely to do anything too unfriendly to the existing staff (but make damn sure you raise any concerns you may have if you get chance before anything is agreed).
However, you implied a question about single/double trigger. If your contract mentions single trigger vesting, it _typically_ means that some/all of your equity vests on a sale of all or substantially all of the company. Double trigger vesting is similar, but would require a second event (usually your position being no longer available, e.g. if you were CTO and the acquirer didn't need two CTOs) to trigger vesting.
Same with a 7-page term sheet. Read every word! There is no such thing as "standard".