I'm not the GP but was one of the first engineering hires in a startup. In my case I got caught in the cross-fire of one of the co-founders backstabbing the other which meant that by the time we closed the series A I had been diluted by 80%. To 'make this up to me' the company gave me a new grant that would counter the dilution. The downsides were that this restarted the vesting clock and the new options would cost a year worth of savings to exercise - this was much more than the few hundred dollars my original grant cost.
Fast forward four years of toil with multiple cycles of doubling and then halving headcount as well as endless leadership changes. We are now on our fourth CTO in as many years. On the upside things are starting to look up! The newest sales team have worked out how to sell the original product we built, not the bells and whistles we pivoted to on the wisdom of the overpaid CPO. We can now celebrate as we have about a year's worth of runway and can confidently project being cash flow positive in about six months.
The new ex-FAANG CTO earning three times as much as anyone in the original team has great news! As a result of the positive development we are now able to hire an extra development team in South America! This shouldn't cost us too much and they can start on the next greenfield effort. The existing developers need not worry about being replaced as the existing team has all of the experience with the money making side of the business, and besides the new devs will be working on a parallel offering anyway.
Four weeks later and we've onboarded two offshore devs. The VCs have demanded we cut our burn rate and my position is being made redundant. I have 90 days to exercise but my options are underwater, both when compared to the funds we raised a few months ago and also the FMV. Essentially to buy them now I would be worse off than someone walking straight off the street.
requires having cash to tie up indefinitely, privilege alert
we did this on our crypto token grants though. once we realized we can play with the prices much more than with securities and that vesting isn’t standardized by any law, we granted ourselves deeply discounted tokens in a vesting schedule of like 3 months, the whole grant being a couple hundred dollars and launched the token the next day. mailing the IRS the election was beautiful.
