John Seiffer
Nov 5 · 1 min read

It is certainly unfair. It is probably not illegal. It’s a case of the powers that be knowing more subtle definitions of terms than the employee. 1% is not what it appears to the normal person. And the advice to ask about the overhang is pretty lame. Even if you ask, and are told the details, and know enough about the terminology to understand them — they could certainly change in a way that’s beyond your control.

As an employee of a company like this you are indeed investing — but there is no level playing field in the world of this kind of investing. Different investors get different terms and have to negotiate for what they get — and can still get screwed down the road. Most angel investors, and LPs of VC companies don’t make money.

My advice to employees is to take what you get in cash and assume any stock or options you get in a young company is like getting a lottery ticket for a present.

    John Seiffer

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    Entrepreneur since 1979 www.CEOBootCamp.com