Employee Hiring Liquidation Preference 
SoCal CTO
SEPTEMBER 27, 2011
I was asked by a reader how much equity he should give out to early employees and to service providers in a very early stage startup. Founders vs. Early Employees To help with this discussion, let me start with a definition of "early employee." I'll get to service providers in a later post. Which means n = (i - 1)/i.
Both Sides of the Table
JANUARY 21, 2010
Forget to get around to setting up that Employee Stock Option Plan and want to be able to give the early guys their options at a low strike price? I know he’s smart but you wouldn’t hire a Javascript developer to do your database design – would you? You need to know how liquidations preferences work.
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Both Sides of the Table
FEBRUARY 23, 2015
There is such a thing as a “diamond in the rough” and let’s face it – if the company was totally rocking would they be hiring you? This is because this “liquidation preference” gets returned to investors before you see any money – restricting the executive outcomes in mid-sized exits.
Both Sides of the Table
MAY 13, 2013
The Aqui-hire Business. If the money comes from professional investors it usually has a “liquidation preference” meaning that their money comes out before the founders or common stock. (If That’s why liquidation preferences exist – downside protection. I know many rank-and-file employees.
Both Sides of the Table
SEPTEMBER 28, 2013
The don’t understand VC liquidation preferences or multiple return expectations. An employee walks up to me and says, “Mark, I’m thinking about buying a house. Most employees want cruising altitude, most founders live in take off mode. You take the meeting but you’re not really pursuing it.
The Equity Kicker
AUGUST 1, 2012
between them, making the aggregate exit value of these acqui-hires 4.2x, which tells us that if the investors on average had a 24% stake they would have broken even on these deals. Whichever way you look at it the conclusion is the same – acqui-hire is not a great exit strategy for investors. Lightbox and Karma had raised money $5.7m
Both Sides of the Table
JULY 19, 2011
On balance I usually prefer to recruit people from my network both in terms of saving costs as well as hiring people I know & trust. One tip – depending on seniority – you can sometimes hire independent reference check firms. It can get expensive so you’d probably only do it for a very senior hire.
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