[datalopers]

And it begins. We’re going to see a lot of VC-backed firms with mildly decent products or teams sell for down-round valuations to those who are still flush with cash.

[hn_throwaway_99]

And remember, in these deals, common stock/option holders (i.e. employees) usually get nothing when the sales price is less than the total invested due to liquidation preferences. This is why it's so important for employees to look at how much a company as raised when considering the value of their equity.

[compsciphd]

down round sale doesn't mean purchase price is less than invested.

i.e. company brought in a total of 30-40 million in investment at a 300 million valuation. sells for 200 million. they still sold for a lot more than invested.

also, for people still at the company, my observation from friends who were in that situation is that if they are buying the company for the talent, they get good retention offers.

In this case, yes, it could be that they are wiped out, but the employees got a salary and the investors will lose money overall. so the employees come out ahead of the investors.

[miiiiiike]

Worse, they probably lost money. Many employees exercise their options anticipating a liquidity event so they can pay the long-term tax rates over the short-term rates. Anyone who exercised their options is probably underwater.. By A LOT. Fungible was really hot at one point. I can imagine employees losing $10k-100k if they thought a sale was coming.

[bmitc]

I am still learning, but in my experience, it has been impossible to estimate actual value because the information is never fully available.

[rjzzleep]

Having been burned by equity of nothing too often I tend to flat out refuse equity in general, but since you bring it up what is the advice/recommendation here?

[hardware2win]

Whats wrong with that?

It is discount time

Buy cheap stocks and cheap companies