SaaStr Annual 2024 is Sept 10-12 in SF Bay!! See You There!!
So a sales exec I've know for a while reached out to me. His old startup was acquired for $150,000,000 -- but he made nothing. He asked me what likely happened. I didn't know too much, but I went down a list: - Did they raise a ton? Like $150m? :). If so, there might be nothing left for employees. But no. They raised about $20m. - Was the headline number exaggerated? Was it not really $150m? No, he said, another ex-account exec he knew made $200,000. Aha. We were getting somewhere. Another similar exec made $200k on the deal, but the AE I knew made $0. Hmmm. I only had so much time, but it didn't quite add up. I just told him to email the company and dig in more. The response was "your stock options expired". Aha. Of course, this happens all the time. Folks have a tough decision when they leave a start-up whether or not to exercise options. It turned out though his friend that had made $200,000 also didn't exercise his options. But -- his friend had gotten an extension of time to exercise. Why? The difference was his friend left on great terms with the VP of Sales, who went to bat for him. But the AE I knew quit on so-so terms, with no notice. So his options expired shortly after he left, per their terms. It was just a reminder. Go out strong. Build bridges on the way out, don't burn them. It generally pays off, even if it's not clear at the time. A ways back at a SaaStr digital event Jeff Lawson, founding CEO of Twilio shared a similar story. He'd previously been CTO at StubHub -- but there had been 2 CTOs at StubHub. The other one made a ton, he made almost nothing. The difference? Jeff was honest. He wasn't 100% committed. He didn't make that mistake the next time.
In No Particular Order: Startup Equity Is Unlikely to Make You Fabulously Wealthy After Four Years Unless One or More of the Following Apply — You were a founder. Your company ends up being worth more than $10 billion. Your company raises very little capital and sells for $500 million+. You join at an executive level pre-IPO for a company that already has huge potential. Even in successful companies, most initial equity grants will be worth a few hundred thousand dollars to perhaps $1–2 million, when fully vested. Rising in an organization and getting more grants pre-IPO helps, but generally it’s just math. Assume you get .25 percent of a company and you’re diluted 50–75 percent before IPO. For an “average IPO” it’s just not millions and millions of dollars. It’s real money. Real good money. But don’t assume one IPO turns you into a multi-millionaire.
That's the wrong lesson. The learning lesson here is that startups need to give a 5 year option exercise window instead of 90 days. Someone who has just left a comoany can't accurately decide whether they want to put money into the company they just left / were fired from.
Our options don’t expire. We thought this was the fairest option. Should be standard imho.
I love that 2 of my last companies have defaulted to 5+ years to exercise. It’s a huge pressure relief to have time to see how things pan out. This is a trend more companies should follow.
Blows my mind how many people burn bridges - there's literally nothing to gain and everything to lose.
sometimes, it was a bad idea building some bridges in the first place, sometimes :D
Eh...that's on him. If you leave/quit a company pre-ipo....you need to understand your own finances and make the decision to buy or not buy your options. Standard terms are usually 90 days after you leave, so he literally had 3 months to decide. The fact that his collegue (who I guess also left at some point) got an exception to that 90 day limit is an outlier.
“Burning a bridge” is never worth it. It might feel good in the moment to leave in a huff, but that’s your ego talking and not your rational mind. You never know what bridge you’ll need to walk back over in the future. Clinging to negative energy is not going to heal you anyway. Its business, its not personal.
Fully understand your comp package - this one is entirely on him
Revenue Enablement | Author "The Teacher's Guide to Changing Careers" | Career Change Catalyst | Keynote Speaker | Transition Teacher Mentor
3dThe lesson here is not about burning bridges. The lesson here is about knowing your worth and being able to read the fine print. The lesson here is know the extension rule and sign your shit before you leave, no matter how you feel about the company and the people you’re exiting from. The constant advice to not burn a bridge in business is starting to blow my mind. Where else in our relationships do we allow that? Do we tell girls who had boyfriends who were constantly late and derogatory to play nicewhen they break up? Do we tell guys who break up with their girlfriends who belittle or embarrass them in front of their friends make sure that they stay friendly once they break up? Do divorces that deal with stealing finances, unfair splits of chores and childcare, and misleading behaviors to stay friends? Do we tell our kids who have a problem with another kid at school who takes their toys or tries to copy their homework to be nice and make sure they stay friends with that kid? We burn bridges all the time in bad relationships. If a job is doing you wrong to the point that you feel you need to leave, how is it that we’re told to suck it up, just take it, and not burn a bridge?