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How to Protect Yourself with Startups?
JustAin'tFair asks: "Last year, I took a chance on a small but promising startup. When they approached me, it was a 3-person operation (all involved were investors) with a functional website, a viable piece of technology, and a problem. Their prototype was just that -- a prototype. They were experiencing serious maintenance and scalability problems, and had exhausted their own technical knowledge. I agreed to come on board as their first employee, in return for a decent salary and a nice vesting schedule."
To make a long story short:"My old boss & his partners netted a very nice payday, on the backs of their former employees. What would you do to protect yourself? I got a fair salary, but in the end, they got far more out of me than I got out of them. Would you contract? Get a parachute written into your contract? What have you done?"
"In 6 months, I rewrote and redesigned most of the key subsystems, built new servers, hired new staff, and got the company rolling on a serious path. Serious senior architect-level stuff. Then it all fell apart: one day, out of the blue, they fired all of us, claiming shortfalls in funding, and so on. It sucked -- it always does (I watched my own startup fall apart in the dotcom 1.0 days). So the other day, I saw they were bought out.
Sucks twice.
In the end, that's their right. At-will employment, and all that. However, it chafes me to get screwed like that."
Sucks twice.
In the end, that's their right. At-will employment, and all that. However, it chafes me to get screwed like that."
Talked to the new owners about a job yet?
One line blog. I hear that they're called Twitters now.
As a first employee with a "good" vesting schedule, shouldn't you have turned a profit on the buyout?
That's my thought as well. My only guess is that he didn't exercise his options. If that's the case, then things get a bit tricky. If he was lied to or otherwise mislead about the status of the company, then he might have a chance of recovering his losses in court. He might even find a lawyer to work for him on a pro bono basis, with the expectation of the judge ordering the other party to pay for the lawyer's services.
If he was not mislead about the status and simply chose not to exercise his options, then he's SOL. Thems the breaks.
Javascript + Nintendo DSi = DSiCade
First, as others have suggested, tell them what a fair market salary and benefits package is and assume the options will be worth $0.
Then, decide how much less money you're willing to take per year for a shot at a bigger pie later. Call that number $X.
Ask them to pay you for the first 2 years as a form-1099 contractor and give them a vesting schedule for buying out your ownership of the intellectual property you produce. At six months they can buy you out for X cash. At 12 they can buy you out for X cash and X stock. At 2 years they can buy you out for 4X stock. If at any time prior to 2 years they fail to maintain your contract, the offer to sell changes to 3X cash and is good for 3 years. Upon buyout or after 2 years (whichever comes first) you expect to be offered a W2 salaried position at the fair market value of your services.
This way you're both reasonably protected. If things go well, they have a fixed and reasonable buyout. If things go poorly then either you walk away with your work-product or whoever they sell the remains to will have to seperatly buy your work product from you. And if the buyer insists on a package deal, they even have a fixed price for it that they know up front.
Moderating "-1, Disagree" is simple censorship. Have the guts to post your opinion.
So, since you know so much about the technology purchased, how it was implemented, and who was involved - drop by! Once you show them your role, you're in the best possible place to argue for and recieve cash and stock in the new company. I know it sucks, but some times it'll all work out in the end.