Ask HN: Am I being fooled at a Dutch startup?
A month ago I (and the other engineers) were finally able to sign the original STAK equity contract. It was apparently an additonal contract. This might be negligence on my side, but I simply didn't know. The equity package and vesting scheme is briefly mentioned in my initial contract. In this new contract the vesting scheme changed and included a lot of additional company and personal goals to be achieved. So it is not only time-based now. (it was said this was for tax reasons). Due to this it makes it a lot harder to vest any additional stock (about half would probably impossible to vest).
I'm on good terms with the founders and I think it is possible to renogatiate this. But I don't know where to start. I read a lot about equity packages at American startups, but this probably doesn't apply for my situation. Can anyone offer me advice - What to do best? - How do I make sure what I vest, I really do vest and they don't change the rules again? - Is it worth anything (even after an exit). - The additional goals were set because of tax authority rules (is this a straight out lie)?
32 comments
[ 2.7 ms ] story [ 90.8 ms ] threadI'd look at the tier 5 and 6 firms, they may be more interested to work for individuals. If they won't act, ask for suggestions as to who might. They may know of freelance lawyers who could be a good fit for you, for example.
Your advice works well before engagement.
Hourly rate is ok if you team up with the other engineers and pay the hourly fee together.
If the company was valued at $1M when you joined and you got 1% (simple numbers), and then the company raises $2M at a $10M pre-money valuation, your share goes down to 1%*(10/12)=0.83%. To keep you from dilution without you buying new stock, then company would "gift" you new shares, about 0.17% (a bit less but it doesn't matter). You'd then have to pay regular income tax on those $20k worth of stocks, likely at the highest tax bracket. It gets worse with higher valuations, and if it's your first startup you'll likely go bankrupt from the taxes before you get to a liquidation event.
(Having pro-rata rights doesn't make this cheaper: you'd need to pay the company the whole $20k to exercise your rights. My goal was to demonstrate that there isn't a way to get no dilution for free.)
If not, because you are just coasting, you should be selling shares to make up for it.
Also: there are ways to use a STAK to screw the stak certificate holders out of their rightful share during a liquidity event so make sure that you know who represents the STAK, ideally a notary public should be assigned as the administrator of the STAK, and not someone in the management. Best of luck!
You don't need to renegotiate anything. Simply hold them to the terms that were originally promised.
I think a fixed-time vesting over 4 years is pretty standard, starting from the moment of employment, with no additional terms. If they're not happy with your performance, they should fire you, rather than withholding shares. I think 0.6% of shares is quite low, and the tax reasons sound dubious.
> How do I make sure what I vest, I really do vest and they don't change the rules again?
The position of non-voting shares is quite precarious I think, because a voting majority in the company can simply dilute shares and render the STAK-owned shares less valuable. Besides that: just read the contracts, the STAK bylaws, and once you sign the certificate holder agreement it's relatively ironclad. I'd recommend getting some legal advice.
This was the intial offering. I agree on most of what you said. The package isn't that interesting (especially with the possbility dilution), the extra vesting requirements seem like it takes away the last bits.
I figure this is probably the case with most employee stock grants -- it's unlikely they'll give out enough shares that even every employee working together could sway elections.
They could try that but if the STAK is properly administered then the notary public would insist on those new shares being paid in full into the company account. This particular trick is fairly well defended against in NL. But there are other ways in which a STAK certificate holder could be screwed out of their rightful share. The important thing to keep in mind here is that for every certificate there is a corresponding share with all of the right associated with that share, in that sense the situation of a certificate holder is not all that different form the situation that a minority shareholder in a company finds themself in with the major difference being that certificate holders themselves do not get to vote and that someone else gets to vote the block of shares in the STAK. If that person were to act against the interest of the certificate holders in any other capacity then they would open themselves up to a pretty good case for a legal challenge.
You're about to find out exactly what terms you are on with the founders.
The easy way to find out if it's really for tax reasons is to find out whether the changes apply to everyone or just the peons. If they won't tell you, you know the answer and you know that they'll lie to you.
FWIW, if there is a legitimate difference between your terms and theirs, it's because real tax reasons apply more strictly to the folks at the top than the bottom. If your terms are worse....
Of course, you know them better than any of us do. If you think it's an honest mistake he may have overlooked, just have a chat and it should be sorted for you.