Ben - An important provocation for founders! I would add one more thing: Accelerated Vesting on change of control for all option holders.
A few years ago, I was having dinner with one of the founders of my first Exit, which was acquired in 2000 for US$100m. This gave him the ability to never work again. He was shocked when I asked him, "What do you think I walked away with?", and I answered, "$36,000".
I bought a Jeep with the proceeds from my first exit.
I was Employee #7 and in a highly strategic role (corp dev/alliances) that definitely contributed to the exit and our valuation. On hiring, at a Director-level, reporting into the CEO, I was granted a modest number of options. As I was a walk-in, I didn't have the benefit of an executive sponsor to vouch for my "worth" (which I saw as the Sales VP built his team with sales managers from his network who got multiples of my initial grant, but that's a whole other story!).
At my first anniversary, I was recognized as one of three Key Employees, receiving 4-5X my initial grant, but at a higher strike price. A little over a year later, the company was acquired and I was 50% vested on Tranche 1 and 25% vested on Tranche 2. Not only that, I had effectively worked myself out of a job (corp dev). So my total participation was 0.00036% of the $100m deal.
"You deserved much more than that", said the founder - 15 years too late!
This is great and super useful as I intentionally construct our equity structure.
Thanks Omar - glad this was helpful for you.
This is one of the best (read: honest) breakdowns of employee equity scenarios and outcomes.
Thanks CJ -- really appreciate that.
Ben - An important provocation for founders! I would add one more thing: Accelerated Vesting on change of control for all option holders.
A few years ago, I was having dinner with one of the founders of my first Exit, which was acquired in 2000 for US$100m. This gave him the ability to never work again. He was shocked when I asked him, "What do you think I walked away with?", and I answered, "$36,000".
I bought a Jeep with the proceeds from my first exit.
I was Employee #7 and in a highly strategic role (corp dev/alliances) that definitely contributed to the exit and our valuation. On hiring, at a Director-level, reporting into the CEO, I was granted a modest number of options. As I was a walk-in, I didn't have the benefit of an executive sponsor to vouch for my "worth" (which I saw as the Sales VP built his team with sales managers from his network who got multiples of my initial grant, but that's a whole other story!).
At my first anniversary, I was recognized as one of three Key Employees, receiving 4-5X my initial grant, but at a higher strike price. A little over a year later, the company was acquired and I was 50% vested on Tranche 1 and 25% vested on Tranche 2. Not only that, I had effectively worked myself out of a job (corp dev). So my total participation was 0.00036% of the $100m deal.
"You deserved much more than that", said the founder - 15 years too late!
100% and thank you for bringing that up.
I had accelerated vesting with GoInstant and that made a MASSIVE difference, considering we were acquired so quickly.
Solid piece, will carry a few of these points forward into my Launch Phase.
That's great Morgen! Glad the article was helpful, and let me know if I can help more.