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Ask HN: Should an early engineer leave a startup facing down round/weak exit?

9 points by cTfNipR ↗ HN
Hired after series A. Quite a few vested options, although the spread isn't huge. Company is 7 years old and seemingly facing either a down round or an exit. There has been an up and down but current trajectory seems ok.

Any reason to wait for the exit or is this a likely loser? Any way to judge the probability of the outcome or red flags to look for?

6 comments

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totalZero
No way to know based on the given information.

Listed companies lose value and face challenges, too. Just like you wouldn't view the outcome of a GE catalyst as a binary situation where the stock either zeroes or rallies, you shouldn't view a semi mature startup that way either. Try to think of the possible outcomes, assign probabilities to them, and decide whether they're favorable.

Ultimately it's your life. Nobody else can take risks for you, nor allocate years of your career on your behalf.

If you're turning to unknown people with near-zero information to give you career advice, then what you probably need is to sort out your thoughts alone or with a trusted friend. What would the exit look like? What signs of failure do you think you have seen? What is the current trajectory?

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[dead] hnisgroupthink
You are posting on hacker news about leaving your job. Ya, there are red flags. If you aren't a founder role on equity just leave. No reason to go down with the ship.
chatmasta
Assuming you’re in the US.

Unfortunately one thing you need to consider is your options exercise window. Most startups require you to exercise them within 90 days of leaving the company or you lose them. When you exercise them, you need to pay AMT tax on the “spread X number of exercised shares.” (Or is this no longer true under Trump tax law? How did that saga end?) Depending on the spread and number of shares, this could be a significant price. But you have no way to liquidate the shares you receive, so you need to front a huge tax bill for receiving shares that may never liquidate.

Depending on the age of the company and your share agreement, you mignt be able to sell the shares on a secondary market. Or if you have a good relationship with the founders you may be able to arrange a buy back, or possibly an extension of the exercise window.

The worst case scenario is you leave, exercise your options, pay a huge tax bill, and the company never liquidates so you’re out a bunch of money.

Or, some pessimistic optimists might say the worst case scenario is you leave, do NOT exercise your options within the window, and then the company DOES liquidate...

All said, it’s not an easy decision and you have much more information to work with than us. My advice: don’t gamble your tax bill on weakly valued options. Whether that means you should quit or not, idk... up for you to decide.

gpapilion
You can defer the tax for 5 years, but you owe on the value at the time of deferment. So, if the valuation drops after you leave your still on the hook for the original deferred amount.
muzani
Startups have very high highs and very low lows. It's normal for things to go extremely bad. I used to keep to a saying: "If you can avoid dying long enough, you'll be rich."

However, another strong rule of thumb I keep to is 'no bullshit'. Bullshit means retaining people who should be fired. Bullshit means following down a long route in order to blame someone. If you're spending a lot of time covering your butt, setting up documents of proof, attending pointless meetings so people can't blame you for not attending meetings... then that's a sign things are going downhill.