Wednesday, January 26, 2011

A VC: M&A Case Studies: Feedburner

The single biggest question I get from friends looking for or taking a new job is not "Where should I work?", but "How many options should I ask for?"

It's a fair question and an important one, especially since we're getting a little older and smarter, and starting to have bigger impact positions. Impact = Options; so now's the time to start thinking about them. "How many?" is a question for another day though, mostly because I can't find Fred Wilson's excellent post on stock option allocation guidelines per position. However, when I do find it I'll post it. :)

The second question on options you should be asking is what happens to acceleration in an acquisition. Most people think they accelerate all their options and they are suddenly rich. This rarely happens, unless you are a Founder or CEO. Dick Costollo, former CEO of Feedburner, currently CEO of Twitter, wrote this excellent post below on accleration. It's an excellent read and here's a snippet below.

Btw - the question that people rarely ask - "Where Should I work?" - is probably the most important. :)

A VC: M&A Case Studies: Feedburner:
"There’s another hidden issue with full single trigger acceleration that I mentioned earlier, and we can call this the “acquirer’s not stupid” rule. If your employees all fully vest on acquisition, how do you think the acquirer is feeling about your team’s general motivation level post-acquisition? They are not feeling good about it. No they are not. They are thinking “gee, we are going to have to re-incent all these folks and that’s going to cost a bunch of money, and you know where that money’s going to come from? I think we will just subtract it from the purchase price, that’s what we will do!”….so the shareholders get doubly-whacked…they get fully diluted to the total allocated options pool AND they likely take a hit on total consideration as the acquirer has to allocate value to re-upping the team."