But your advice is still basically "Don't work for a startup", because I still do not know of any startup that would incentivize employees with preferred shares.
I think much better advice is to (a) be sure you have a good understanding of the cap table, and what the liquidation preferences are for the preferred investors, and (b) have a general sense of how likely it is for your shares to be diluted over time.
No, my advice is to balance the expected return on your stock against your personal margin of safety - startup companies have younger employees almost entirely due to the reduced cost of the risk.
My personal risk level is maybe lower than “I quit my job and started a company”, but I consider my work to have value, and I consider an employer structuring employment agreements such that my return is is given a lower precedence than another investor to be either sign that they do not value my work at at least market rate, and given the risk entailed my expected income should be much greater than market rate.
Your claim is basically: startups have been able to screw employees because that’s what startups do.
The funding your describing for example is /not/ funding, it’s an extremely high interest loan, and in that case should not be considered a share in the company.
I also realized I had not said earlier: the theft in this case did not happen when the company was sold, it happened when one group of shareholders rewrote the company charter for the express purpose of devaluing the shares belong to all employees.
This gets to the heart of my problem with the “pro let yourself get screwed” argument: because VC funding is miscategorized as ownership rather than a loan, it is in their interest to screw the people who actually invest in the company.
Maybe it makes me unemployable for believing that my work has value and my not believing that “taking on risk” should mean “others should be able to treat my investment in the company as being not real investment” is unrealistic.
But I find it hard to feel sorry for anyone stupid enough to sign a contract that has any room to legally discard your investments. Is it bullshit that this company did that? Yes. Is it the employee’s fault that they had their investment stolen: yes.
Would I ever sign a contract that allowed someone to dilute my investment in anything without compensation? Of course not, because that’s stupid.
> Would I ever sign a contract that allowed someone to dilute my investment in anything without compensation? Of course not
So you’d never buy a share in a public company either, since public companies are allowed to issue additional shares to new investors when they raise capital.
I don’t see anything wrong with your view. It’s basically an extremely conservative risk tolerance perspective. But it’s extreme, and extreme views tend to leave money on the table.
I think much better advice is to (a) be sure you have a good understanding of the cap table, and what the liquidation preferences are for the preferred investors, and (b) have a general sense of how likely it is for your shares to be diluted over time.