I actually have almost the same story. Spent long nights and weekends building a company for a number of years, from the ground up, and I was naive enough to go off a handshake and a verbal promise that my boat would float when all the rest of them did.
When it started to look like the company would be sold, I politely asked if we could finalize an agreement in advance of knowing the sale amount, so that all would be clear. And I wasn’t expecting the moon, just fair compensation if the company was sold. We never even got that far.
2 weeks before the owners sold the company, and I was left out of the org chart handed to potential investors, I was “asked to leave”. I could have sued but I was young and didn’t have the money or energy to do it, so ultimately I left and moved on with my life. Not before going through a period of burnout and depression.
It still stings sometimes. The owners got off with all the money, and I never saw a dime.
A very expensive lesson learned.
That said, I have come to learn, I don’t think I would have been where I am if it had gone any differently - a place where I can sleep at night.
This is pretty typical behavior for a lot of startups. I once witnessed a situation where management (knowing that most people's options were way underwater) got a 'top slice' agreement where X% of an acquisition would go straight to key personnel.
Amusingly, this identical vague mechanism was given 2 different names: "Management top slice" when talking to investors/managers, and "Engineering top slice" when talking to the engineering staff.
This ridiculous mechanism was never defined (and ultimately no acquisition occurred in that time-frame), arguments over it ultimately may have helped a few engineers get out so that was about all the impact it had.
The lesson is not to count on verbal agreements. If they don't put anything on paper it's because they don't want to and don't value you enough to care, not because "the time isn't right" or similar nonsense.
Why do you think the founders did that? If they made serious money, why not throw at least a bone at you to compensate for the work? Do you think it was all pure greed, or something went wrong in the relationship between you and them before that?
If they made 100, why not give you 0.1 and keep the 99.9 for themselves? In my home country, doing something like that would probably cause the founders to be worried about their physical safety (eastern europe).
Clearly you did wrong in not having it in writing, but if you were dealing with such vipers, who knows if having it in writing would have been enough anyway? Very shady
I think they had been burned by someone else before, and were not very trustworthy people. I learned later just how shady they were, things I hadn’t seen because I was too busy trying to actually build something that worked.
I think after that it was pure greed. It was a “family-run” business and the wealth stayed with “family”.... and I was just an employee.
The reason I said I can sleep at night is because later in life I realized, I was better off without their money. I would have not felt as good if I’d had gotten it given what I learned about their character and business practices which I had not known about.
It’s truly horrible. I’ve been at a startup for 4 years now, all my options are vested and partially exercised (including some painful amt tax ugh), but I’m paranoid that at the last minute, if it even arrives to that point, everything will be pulled away from me with some magic trick.
That’s one of the reasons why I am not moving on to other opportunities even if my grant is almost all mature, I don’t want them to “forget my face” when the time comes, it might help them screwing me.
And I’m not talking about dilution, liquidation preferences, ... that stuff is business risk, I’m talking about dealing with greed of people.
I didn’t stick through it in my case since I was “asked to leave” and had nothing in writing, one of the weirdest experiences of my life but a clear sign that something was not right.
But if you can stick through it I hope that on the other side of it you come out in a good way.
Depending on your agreement and country, one can only hope that what you have protects your interests well and can be enforced.
In my case, I could have gone after them because verbal agreements are actually still valid and enforceable, although complex and legally expensive to pursue. But I couldn’t get myself to do it and by now it is years past the statute of limitations.
I don’t know but somehow greed and survival and the human condition are all inextricably linked. All I can say is I wish you sincerely the best.
I still came out with something at the end - a cautionary tale, a lot more experience, and my honor. Depending on how you measure things, that counts for a lot to me, although it doesn’t necessarily put food on the table, or a roof over your head.
I never wanted (and still never want) to work at a startup. Without my knowledge or consent, my business partners acquired a small percentage of one, thereby bringing some measure of that toxic atmosphere into my work environment where I thought I was safe. Now there's at least 3 levels of secrecy and collusion as everyone maneuvers in expectation of a truly enormous payday that I truly do not believe will come. The tragedy is that when the startup in question fizzles, I'm still never going to break bread with these "partners" again, ever. If we had just stuck together and kept our heads down, we could have made plenty of cash, but the scent of blood changed them directly into people I can barely share a respectful meeting with, and they're starting to figure that out.
Basically they pretended to go out of business and reorganized the company slightly to purge all equity holders they didn't actually want to have equity.
I lawyered up but I can only afford a five figure lawyer, at that point they were willing to bring in a seven figure lawyer so that was that.
What you’re mentioning sounds more like a case where the company was not a big success and things like heavy dilution came into play? In that case, I’d hardly call it “getting screwed”, that’s just a risk of doing business with a startup that failed to execute properly, or lost against opposing market forces.
In other words, when the company goes bad and it’s forced to take heavy dilution or aggressive liquidation preferences it’s obvious that common holders are going to get wiped out. But, and that’s the part interesting to me, what greedy behavior from a company can make the common holders get screwed even when the company sale is a big success?
An example of getting screwed was the clawback clause that the Skype employees had, which gave the company the right of buying back the exercised shares from common holders at the original exercise price rather than the market value at sale time (or something like that). That’s called “being screwed”, not seeing your shares getting wiped out because your founders had to dilute the common holders (which many times includes themselves) 50% during a difficult fundraise.
I also was majorly, majorly deceived about my equity stake, even though I was one of the two all-in founders and built both of our products. I suggest you insist on helping with the initial legal. Have your own lawyer review the documents. Insist on seeing the cap table if you are mostly taking equity. I highly recommend calling references if you don't know your business partner well. Finally, I suggest playing a visible role in representing the company to the outside world. This way, your cofounder will have a difficult time hiding you from future investors.
One found a way to screw me out of all the equity as well, which would have made me a ten something millionaire.
Once people start smelling money things shift quickly.