He forgot the part where some of the executive team is offered a big payout for retaining employees for a period of time. At which point they at incentivized to straight up lie about how great it is to be bought and sold like cattle. That sweet, sweet stock vesting will make it worthwhile. And then it never quite seems to work out, but the horror only settles in after they get theirs.
I respect and trust my founders, but I also believe The Machine can corrupt amd manipulate anyone. At a certain point I wrote off all my stock options as a free lottery ticket, and have valued them at $0 in my big picture life ledger. I work for a combination of money today and love for what I do, but not for the promise of ritches one day.
There's always a chance I'm being foolish or paranoid, but this approach is the safest.
You don't really value them at $0. Shoot me an email and I'll send you a binding contract saying you'll transfer them to me for $100 paid now.
Hey, that's $100 for free! Only it shows you don't really value them at zero. It's only a slightly smaller lie than founders who insist their startup is worth hundreds of millions.
"I value them at zero" is shorthand for "I am not planning my life around them having any value, such as buying a house with a mortgage so large that the only way I can pay it is for those stock options to be worth something significant." Yeah, technically that's not what it means exactly, but when you're making your life plans as if them cashing out at $0 is the most likely outcome, it's not entirely wrong either.
In many (most?) cases shares are not transferable in this way. If they are, there is often some kind of private market and the shares have an actual real value.
This makes it much more sensible to value them near zero.
A lottery ticket still has a value, so, they're not valuing them at $0. But they are planning for the case where the value goes to 0, which is a very sane thing to do.
Don’t think it’s so much an issue of “forgot.” Thats just an alternative example of things that could happen based on the myriad way corp dev deals can be structured based on the goals/incentives of the acquirer.
From my admittedly limited experience of being acquired by a Fortune 200 scientific company, it seems to me that the empty promises and planting of false hopes - to get key people to stick around a few months - is pretty much SOP in any kind of *tech.
Chances are the outgoing CEO or GMs compensation is tied directly to how many key personnel he can keep on, in order to maintain profitability.
After they (the deal team) brain drain the key personnel, they cut the dead weight, move any existing profitable parts of the business to an existing facility, and then shut it down before moving on to the next acquisition a week after that.
Here’s the interesting pattern I’ve noticed. The promises are almost always issued from someone not on the board and not a major shareholder. If the person delivering the news doesn’t have the power to back up the claims then good luck getting them to honor them.
The moment they have a VP telling you everything is going to be great you need to start hedging your bets. Update your resume. Catch up with your contacts. And for the love of Pete, don’t make any major purchases.
to be fair, what do you think the purchasing company wants out of the deal? Acquisitions are generally structured as a) acquisition of key talent, b) acquisition of customers, c) acquisition of technology/IP, d) efficiencies from cutting duplicative functions (accounting, HR, etc).
I'm not so sure that there needs to be some sort of greater altruism at play here?
Author of the article here. Yes, there are plenty of different ways to wind up a company. But the primary goal of the series was to go over the most common legal terms in investor agreements, so I took this last piece as an opportunity to mostly cover seniority structures and liquidation preferences.
Man, do I have some latent resentment...