Ask HN: I think my company might be selling. What should I be doing to prepare?

I've worked now for three separate startup/small companies in which I had some measure of equity. In all three cases, they did some legal sleight-of-hand to reduce that value to nothing. The first time it happened, I was outraged, and researched my options to fight back (I had none). The second time, I was hopeful but unsurprised when it turned out the same as it had before. The third time, I rolled my eyes when they even mentioned "equity" and paid close attention to the salary because I knew that was the only actual real money I was ever going to get (I was right).

Posting from a throw away account - I've recently exited a company after an acquisition. Employee payout was laughable: gourmet burgers cost more. There were tears and terminations.

If you still think that you are in a small company, you are most likely going to be screwed (imaginary valuation would come crashing down). Things to consider:

1. Verify if you have options on equity or actual equity. If you do not have equity and you only have options, you need to look at your agreement to see what happens to non-vested or vested but non-exercised options during the liquidity event (It is possible that they get wiped out or they get bought back by the company at some very low valuation). It is possible that you would need to exercise your options ASAP.

2. If you have equity and there's a sale in the works and you have voting rights (not all equity has voting rights ) then you will get to see and vote on the terms of the deal.

3. If you have equity and voting rights and the terms look terrible to you ( but you think the other party really wants for transaction to close and you are OK burning bridges, it is possible for you to get better terms for your shares than the general deal - a company may be willing to buy back your shares even at a premium just to make you go away )

4. You should presume that you will be terminated by the new company. Start looking for another job now.

5. Good luck.

I worked for a tech startup for about 18 months before we were acquired. Things weren't looking too well and a larger company in a similar industry was looking to expand. Instead of building their own, they opted to acquire our IP and five person team. We had several meetings with the senior leadership of the acquiring company and from what they told us their company was a wonderful place to work with huge prospects of success in the short term. They offered each of us on the team a meager raise and large signing bonus, payable over 18 months. Fast forward a few months and I find myself working for a more bureaucratic and mismanagement company that I thought could exist. Our small team continued to operate as a stand alone unit for a while and were the only team meeting our deadlines consistently. Eventually employees on other teams started seeing that we were doing good work, had autonomy, etc and our team doubled and then tripled in size in the span of just a few weeks. Managers that had been with the company for a long time were brought in. New team members brought there own inefficient processes from other parts of the company and before long our team was missing deadlines and generally not being productive. Once our products had been succesfully integrated into their existing suite, I left. It was hard to watch such a productive team (which we truly were) get destroyed by people who thought they knew best just because they had a few years of middle management experience behind them. I feel like next time a company is interested in acquiring something I'm working on I'll have a much better sense of the type of questions to ask, e.g., what are your current and historical retention rates? Will be be able to continue working as we have and for how long? We were also told that the company had great remote work options, and they did. Our team just wasn't allowed to use them. All in all it was a interesting experience and I certainly learned a lot.

Be prepared to get a bullet any moment. When it comes to company sales, no technical person is untouchable. Even if you "know" things couldn't be done w/o you, they don't. That equity that is 'nearly fully vested' would do much better in the pockets of founders who are fully vested and don't need to share another crumb with a fungible resource. I'm not exaggerating, and not joking. Anecdotal, yes: but layoffs to keep equity out of underlings hands do happen.

If I had to do it over again, to better my chances of increasing my retention bonus, I would have stayed at the job as close to the signing day as possible and then threatened to walk a week prior.

During the acquisition that I went through, we were promised that everyone was going to get great retention packages and salaries. At the end of the day, it was stock that amounted to several thousand (lol, vested over 4 years!) and my salary offer was the same. Completely laughable compared to the hype we were fed.

I was living in SF at the time. The additional amount I was offered I could have hustled part-time consulting and saved it within a few months.

I should have left.

I worked for a moderately successful startup that got acquired and I had both options and grants. All vested options and existing shares were paid out as cash. Unvested options and grants were then paid out as a cash bonus on the vest dates if you were still working there.

Options were valued at sale price - exercise price. I had grants at different prices, but on average the cash value was about double the original grant values. I had been working there about 3 years. Also got a two year retention bonus worth 60% of my salary at the time of acquisition. Didn't make me rich, but it was a nice chunk of change. People who had been there longer had lower grant prices and made a LOT or money.

There isn't really anything you can do besides exercise early to try to get long term cap gains, but that's more risky than it's worth IMO, because the shares could end up valueless and you're screwed.

Figure out what percentage of the company you own. Saying you have something like 50,000 options is meaningless unless you know what others own. 50,000 options could be .001% of the company or it could be 10%. You have no idea.

They'll probably hate you if you ask to see the CAP table, but that's the info you want. Don't be shocked if your options end up being less than 1% of the company even if you were one of the first 10 employees.

Personally, I was part of a 15 person angel-funded startup that sold to a private company for 30mm at the direction of a VC firm. They bought out all of my options at full value.

I had less than 1% equity. I didn't get much money but got about enough to make my salary what it would have been if I'd been working for a bigger company. That's it, but it was about what I expected and seemed fair given how my salary/options were presented to me when I was hired.

Once sold, the new company will either fire you pretty quickly (within 6 months), or will create some silly incentive plan to try to get you to stay. I stayed on with about a 20% salary increase, which brought my salary up to the market rate for a big company. I was happy with this agreement.

Be prepared for a lot of office politics and difficulty integrating with the acquiring company. This will be the hardest part. It's substantially more complicated than the financial part of the sale.

You probably won't get anything much. Start looking for another job.

There aren't very many concrete things you can do at this point. All I can come up with is:

- Find a good CPA if you don't already know one, just in case your equity turns out to be worth something

- Consider carefully whether you would stay (and for how long) if you were offered some kind of "golden handcuff" deal

- Start thinking about what you would like to do next

Shareholder/liquidity preference is very important... for example if you are VC backed and there are multiple classes of stock, eg. common vs preferred, you will probably find that preferred stock holders have payout preference. Even if you own a large chunk of common stock the purchase price might not be high enough to take care of preferred stock holders with any significant amount of money left for common shareholders. Generally, at a certain acquisition price preferred stock is converted to common and all shareholders treated equally.

Best thing is to have someone review all your stock agreements and such.

Anecdotally, the last company I worked for was eventually acquired (long after I left) for low 9 figures. Turned out the price was just enough to pay back investors and other shareholders got nothing... I imagine that felt pretty shity for folks who spent years building "equity."

I went from full time to contract and failed to exercise vested options shortly before a startup I worked at exited. However, as usual the upside wouldn't have been very lucrative anyway after dilution and preference. I was hired and stayed at the acquirer where we have been given great autonomy to grow into a much larger organization, as well as good pay.

In most cases I suspect your upside as a higher ranking employee at the acquirer will be far more important than your upside from the exit itself. If you are interested in the acquirer you would do well to position yourself to get a good role there.

I would suggest prepare for the interview. It could be internal interview on presale of your company. Or they could fire you and you will have to find a new job.

Legal advice would be useful, at least in conjunction with any other advice.

Some lawyers charge a flat fee for a one-off consultation about questions such as yours in connection with a potential separation employment, including the "small amount" of equity you've got, any potential agreements or restrictions you may be under, etc.

Seems like every comment at this stage is about getting shafted when your startup gets an exit. Other than supposed the lack of politics and more bleeding edge tech - what is the point of working at a startup if you aren't looking for an exit? (Especially for early hires)

Cash is king. Get cash. Don't sign over your equity without a lawyer and or accountant reviewing to see how you're fucking yourself.

I had many friends in the Bay Area get screwed on shit like this. Good luck, your'e screwed! :-)