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Comment by paul | Hacker News Reader

Pre-ipo transfer restrictions are pretty normal. It never even occurred to me to try selling Google pre-ipo. It wasn't really a thing before secondmarket came along, and arguably trading on those markets is taking a company public without their consent.

If I ever start another company, I would definitely have transfer restrictions. It's pretty important to control your equity, and I think the day-trading mentality is toxic. (I would also avoid ever trading on the traditional stock markets, but that's a larger topic)

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> It's pretty important to control your equity, and I think the day-trading mentality is toxic.

Equity is compensation. You can't tell your employees what to spend paychecks on, and you shouldn't be trying to block them from gaining liquidity. Maybe a doctor just told them they have a year to live, and won't be around for your planned 2019 IPO.

Unless you are granting them voting shares it is unfair to lock them into your vision of the company going forward, especially if they have departed.

I agree that it needs to be clearly communicated (and perhaps they did not do that in this case), but there's no reason why equity must be liquid. I certainly have no expectations of immediate liquidity in my startup investments.

Voting is a non-issue. Assuming things are structured right, the founders should retain majority control. The investment is primarily an investment in their vision, not something to be micro-managed by shareholders.

As a founder, how do you attract engineers from places like Google to your startup?

"I am Paul Buchheit, I made Gmail" seems like it would work for you, and something similarly awesome might work for like 10s or 100s of founders.

As a Google employee (with pretty high, low variance, liquid compensation), it seems having stock/options or options even a successful pre IPO company are kind of terrible. When you seemed to have won (worked for a successful company, vested), you don't even really win, or at least, not yet. Stay in that same desk, working on that same project until some indefinite future liquidity event happens.

> an investment in their vision, not something to be micro-managed by shareholders

My point was exactly about vision. Founders vision often change from what was pitched when you join.

Let them have a say or let them out at a fair market price.

"there's no reason why equity must be liquid"

There's also no reason why equity must be illiquid -- or skewed to benefit a company more than the employees that built it. There are ways for people who received equity as compensation to take a little out on terms that are fair for everyone. Just because it's always been done a certain way is not a good justification for this position... after all, Uber is breaking the taxi business in a similar fashion.

And it's doubly unfair to restrict the stock so that you can buy it back and then flip it for a much higher price. There might be legitimate reasons to control stock shares, but "so you can screw the people who backed you when nobody else would" is definitely not one of them.

Racketeering?

Transfer restrictions need to buy the stock at the offered price. If I have a good faith buyer willing to pay $200 per share, the company should offer $200.

I was a start-up where the board just decided to be as difficult as possible, just to be difficult, and said, "you will need to hire an auditor to review the books to come up with an accurate market value, and we will not cooperate with the auditor", not in those exact words. Which of course completely breaks the books of a minority shareholder in a moderately successful company.

But this is completely backwards…

It's not the companys equity, its the shareholders equity - a company is owned by it's shareholders not the other way around.

It the same sort of issue thats allowed management teams in large listed companies to just do what they want even when it's not in shareholders interest - compare the compensation packages of many boards with the return they make for shareholders.

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