VIDEO Startup Stock Options: Exercise Price Basics

Negotiating your startup stock option offer? Use this video to understand the exercise price. 
 

Stock Option Counsel, P.C. - Legal Services for Individuals.  Attorney Mary Russell counsels individuals on equity grants, executive compensation design, employment agreements and acquisition terms. She also counsels founders on their personal interests  at incorporation, financings and exit events. Please see this FAQ about her services or contact her at (650) 326-3412 or by email.

How VC's Vet Founders - Who Did They Fire?

Stock Option Counsel, P.C. - Legal Services for Individuals.  Attorney Mary Russell counsels individuals on equity grants, executive compensation design, employment agreements and acquisition terms. She also counsels founders on their personal interests  at incorporation, financings and exit events. Please see this FAQ about her services or contact her at (650) 326-3412 or by email.

Another reason to play nice, from Don Rainey of Grotech Ventures via Dan Primack's Term Sheet:

[A]lleged sexual harassers are legally enabled to job-hop without new employers learning about their pasts .... I [asked Don Rainey of Grotech Ventures] how VCs can adequately vet founders or senior portfolio execs. ‘I try to find people who were fired by the person we’re looking at, because people who have been fired have a certain zest for telling you things that might not otherwise show up.’ -Don Rainey of Grotech Ventures
— Dan Primack's Term Sheet

Stock Option Counsel's Mary Russell in New York Times on Liquidity for Private Stock

Stock Option Counsel, P.C. - Legal Services for Individuals.  Attorney Mary Russell counsels individuals on equity grants, executive compensation design, employment agreements and acquisition terms. She also counsels founders on their personal interests  at incorporation, financings and exit events. Please see this FAQ about her services or contact her at (650) 326-3412 or by email.

For start-up employees, the more explicit language around stock prohibitions can create downsides, said Mary Russell, a lawyer based in Palo Alto, Calif., who works with start-up workers to evaluate their equity compensation. When employees leave start-ups, they often have the opportunity to buy stock that has been set aside for them at a low price. But if their start-ups have been successful, they also need money to pay taxes that will be levied on the increased value of the stock.

Ms. Russell said it is not unusual for a client to say their private company stock is worth $3 million, but that they need to come up with $1 million to pay for the shares and cover the tax bill. “In the past, the solution has been to find a third-party buyer and sell enough of the stock to cover all of those costs,” Ms. Russell said.

The use of more explicit language to cover what is and is not allowed could eliminate the option of raising cash from a third party, Ms. Russell said.

She added that employees rarely read their paperwork carefully. “In some cases a company is simply clarifying its terms, but some are making a black-and-white shift to more restrictive terms,” she said.
— Katie Benner, Airbnb and Others Set Terms for Employees to Cash Out, New York Times
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Stock Option Counsel, P.C. - Legal Services for Individuals.  Attorney Mary Russell counsels individuals on equity grants, executive compensation design, employment agreements and acquisition terms. She also counsels founders on their personal interests  at incorporation, financings and exit events. Please see this FAQ about her services or contact her at (650) 326-3412 or by email.

The Gold Standard of Startup Equity - A Guide for Employees

Stock Option Counsel, P.C. - Legal Services for Individuals.  Attorney Mary Russell counsels individuals on equity grants, executive compensation design, employment agreements and acquisition terms. She also counsels founders on their personal interests  at incorporation, financings and exit events. Please see this FAQ about her services or contact her at (650) 326-3412 or by email.

Learn the three standards that define Startup Equity and three questions to ask to know if you have the real thing. 

1. Ownership - “Can the company take back my vested shares?”

2. Risk/Reward - “What information can you provide to help me evaluate the offer?”

3. Tax Benefits - “Is this equity designed for capital gains tax rates and tax deferral?”

Stock Option Counsel, P.C. - Legal Services for Individuals.  Attorney Mary Russell counsels individuals on equity grants, executive compensation design, employment agreements and acquisition terms. She also counsels founders on their personal interests  at incorporation, financings and exit events. Please see this FAQ about her services or contact her at (650) 326-3412 or by email.

March 14 Event: Bill of Rights Discussion

Stock Option Counsel, P.C. - Legal Services for Individuals.  Attorney Mary Russell counsels individuals on equity grants, executive compensation design, employment agreements and acquisition terms. She also counsels founders on their personal interests  at incorporation, financings and exit events. Please see this FAQ about her services or contact her at (650) 326-3412 or by email.

Thanks to the 300 people who joined Chris Zaharias, @SearchQuant, and Mary Russell, Attorney Counsel to Individuals @StockOptionCnsl, for this event in Palo Alto on March 14, 2014! 

We had a great discussion of how to define and improve startup equity. For Mary Russell's current suggestions on the topic, please see Startup Equity Standards: A Guide for Employees.

Here's what we discussed at the event:

Right to Know. Company information on capitalization and valuation, being necessary to the employee’s negotiation of a fair compensation package, shall be provided to the employee with his or her equity offer and after each dilution and valuation event.

Right to Value. The right of the employee to earn the full value of his or her grant shall not be limited by unreasonable vesting terms.

Right to Hold Earned Equity. The right of the employee to hold vested equity up to an acquisition or public offering shall not be violated, and no forfeiture, repurchase or other provisions shall allow the company to seize vested equity of current or former employees.

Right to Tax Benefits. The employee shall enjoy the right to all tax benefits available from state and federal governments, and shall not be subjected to tax penalties due to company negligence, at grant, at vesting or settlement and at company acquisition or sale of stock.

Right to Ask. The right to evaluate equity shall not be violated by company limits on access to information or legal counsel.

Chris Zaharias, SearchQuant LLC

Chris is a startup veteran and advocate for startup employee equity rights. chris@searchquant.net (415) 832-0089.

Stock Option Counsel, P.C. - Legal Services for Individuals.  Attorney Mary Russell counsels individuals on equity grants, executive compensation design, employment agreements and acquisition terms. She also counsels founders on their personal interests  at incorporation, financings and exit events. Please see this FAQ about her services or contact her at (650) 326-3412 or by email.

VIDEO Startup Stock Options: Negotiate the Right Startup Stock Option Offer

Stock Option Counsel, P.C. - Legal Services for Individuals.  Attorney Mary Russell counsels individuals on equity grants, executive compensation design, employment agreements and acquisition terms. She also counsels founders on their personal interests  at incorporation, financings and exit events. Please see this FAQ about her services or contact her at (650) 326-3412 or by email.

 

Stock Option Counsel, P.C. - Legal Services for Individuals.  Attorney Mary Russell counsels individuals on equity grants, executive compensation design, employment agreements and acquisition terms. She also counsels founders on their personal interests  at incorporation, financings and exit events. Please see this FAQ about her services or contact her at (650) 326-3412 or by email.