[HN Gopher] Ask HN: Am I being fooled at a Dutch startup?
___________________________________________________________________
Ask HN: Am I being fooled at a Dutch startup?
A couple years ago I started working for a Dutch startup. I was
offered an equity package, but didn't think much of it at that
time. After going through a couple of funding rounds, well, I
started looking into it. The Dutch structure is called STAK and is
basically a company-in-a-company without any voting rights.
Currently it is about 6% of company stock divided among 10
employees. I'm still very well aware that it could be worth 0 EUR
in the end. I also very well aware of tricks being played by
investors and engineers being squeezed out of their faire share.
Since money came, it all about scaling up and getting a good exit.
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)?
Author : throwaway106720
Score : 23 points
Date : 2022-04-15 20:45 UTC (2 hours ago)
| y7 wrote:
| Wait, you were offered an equity package _years ago_ but are only
| now receiving the certificates, and there is still a remaining
| vesting schedule? This sounds extremely fishy.
|
| 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.
| throwaway106720 wrote:
| > I think a fixed-time vesting over 4 years is pretty standard,
| no additional terms.
|
| 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.
| notreallyserio wrote:
| > 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.
|
| 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.
| abbadadda wrote:
| Do you have a lawyer? Have you ever had a lawyer look at any of
| these contracts? That is where I would start.
| throwaway106720 wrote:
| No, but I'm looking for a law firm that has experience with
| funded startups
| jacquesm wrote:
| There are a lot of them in Amsterdam, not cheap but usually
| quite effective, Loyens & Loeff comes to mind and possibly
| Kennedy & van der Laan.
| FearNotDaniel wrote:
| First rule of con artists, poker players and startup founders: if
| you can't tell who the sucker is, it's you. Doesn't matter what
| they promise you, it's all smoke and mirrors and they can take it
| away or make it worthless any time they like. Negotiate the best
| salary you can, and don't give up a single cent of that monthly
| money in the bank against some empty promise of future riches.
| You already suspect they're lying to you, don't lose any sleep
| over it, just ask yourself if the monthly salary is worth the
| work you do and if not, go somewhere else.
| kohanz wrote:
| I don't really get this rule in the context of a startup. In
| poker, the point is for there to be a win-lose arrangement
| where you are the winner. Are you saying that one should only
| consider joining a startup where they consider the founder(s)
| to be a "sucker"? I doubt that's a good plan.
| jacquesm wrote:
| This is practical, but ultimately not the best advice, the OP
| already has a lot of time and potentially money sunk into this
| endeavor and should at least ascertain their position before
| making rash moves.
|
| Your advice works well _before_ engagement.
| mongrelion wrote:
| Reach out to Watson Parken, they are an Accounting & Financial
| Advice firm based in Zaandam. They will be able to give you the
| best advice you need for your personal situation.
|
| Hourly rate is ok if you team up with the other engineers and pay
| the hourly fee together.
| throwaway106720 wrote:
| Thanks for the advice. Hopefully, I can team up with some
| colleagues.
| iforgetti wrote:
| Hire a lawyer if you are serious. No advice here will compare.
| Hire a lawyer who specializes in work with venture funded
| startups.
| SOLAR_FIELDS wrote:
| Related because it's such a common refrain: Is it possible, as a
| founding engineer or similar, to structure the contract in such a
| way as to make your shares undilutable? I suspect the answer is
| theoretically yes, but would be interested in how it works out in
| practice.
| rsstack wrote:
| Anything other than pro-rata with MFN will have a tax liability
| for you.
|
| 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.)
| jacquesm wrote:
| You usually have the option to buy newly issued shares pro-rata
| and at the same valuation as the other buyers, but I've never
| seen shares that can not be diluted (essentially that would
| mean automatically issuing and assigning shares to one or more
| shareholders without the issuing funds being paid and afaik no
| notary public will sign off on that, shares need to be paid
| into the proper vehicle).
| jacquesm wrote:
| I can't tell you for sure, but it _feels_ off if the deal was
| changed compared to what it was stated as before. But you
| probably should have pushed a bit harder on them formalizing the
| STAK agreement earlier. Still, it could be nothing at all and
| maybe they simply aren 't aware that your original deal was a
| different one, but such things rarely (if ever) happen by
| accident.
|
| 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!
| throwaway106720 wrote:
| Thanks for the advice! I agree, I think things like these
| rarely happen by accident.
| jacquesm wrote:
| The notary that handles the STAK paperwork is an impartial
| party, you could approach them to ask if they are aware that
| the deal offered is not the one originally agreed to, the
| notaries tend to take a very dim view of such tricks and may
| well act on your behalf.
| paxys wrote:
| > I'm on good terms with the founders and I think it is possible
| to renogatiate this
|
| You don't need to renegotiate anything. Simply hold them to the
| terms that were originally promised.
| lr4444lr wrote:
| Wait, you're 2 years in, and you signed a contract to a different
| vesting schedule? This is setting off alarms in my head. Your
| equity rights are part of your comp., and what is earned in a
| prior agreement that was signed when you started cannot just be
| made contingent again by adding new requirements. At least not in
| the USA. I'd get a legal consult ASAP.
___________________________________________________________________
(page generated 2022-04-15 23:02 UTC)