Another story of non-executives being screwed over stock - we’ve seen claw backs, revaluation, reweighting, etc
Seriously people need to stop accepting anything other than actual, real shares, that aren’t any kind of lesser grade/b class shares. Guaranteeing investor payback over employee payback.
Employee’s, especially early ones, are taking more risk than the VCs and should be compensated at a higher rate. If investor repayment is higher priority in funding rounds/buyout employee investment should be paid back before purely cash investors.
The reality is that you need to be able to trust the founders and board members you work with. A corporation's board typically has the authority to issue new shares (thus diluting existing shareholders), so even having unrestricted common stock or even preferred stock does not guarantee that you will always own a certain % of a company's outstanding shares.
Between all the preferred share terms, warrants, options, contingent earn-outs, etc, there's a million ways to engineer the divvying-up of proceeds in a sale.
Ultimately, it comes down to whether you trust your leaders to hold to the spirit of their agreement with you.
All that said... it would be really interesting to see a corporation with bylaws and governance/voting structured in such a way that employee ownership and payout %s could be maintained within certain guaranteed bands. It would severely limit that corporation's flexibility, and might lead it to have a higher risk of failure in bad funding market environments... but it could become a big draw for high-value employees who strongly prefer equity certainty over cash comp and company autonomy.
This is 100% true. You need mechanisms that validate and verify that trust (real stock or standard options, documented legal contracts, etc..) AND you need to have the personal trust in the board/founders in the first place.
Even with both there's risk beyond just market risk, but at least you've done what you can to minimize it.
It's an unfortunate mix of both, according to The Information. A co-founder, early investors, and employees aren't receiving stock because their contracts were dependent on future fund raises (which never emerged).
Nobody is going to offer you priority stock with maximal liquidation preference, even if you are at CxO level (you get priority, but a lower liquidation preference). Investors get the best ones; regular employees are out of luck most of the time; they should be happy just to get (worthless) common stock.
Seriously people need to stop accepting anything other than actual, real shares, that aren’t any kind of lesser grade/b class shares. Guaranteeing investor payback over employee payback.
Employee’s, especially early ones, are taking more risk than the VCs and should be compensated at a higher rate. If investor repayment is higher priority in funding rounds/buyout employee investment should be paid back before purely cash investors.
The end.