What if the startup I work for gets bought out?


I am the technical founder of the startup that I work for. My software, that I architected, runs on a device that has won a Gold award even before the trade association's show.

The startup is well-funded by VC's but it seems that they're restricting sign-on bonuses.
So instead I'm getting hiring options.

Currently (pre-IPO) the value of the stock options is completely theoretical. I'm betting that the startup will be bought before the vestment period is over.

Question: what happens to my promised stock options when a massive corporation buys the startup ?

Equity Legal

asked Apr 7 '12 at 02:30
Someone Somewhere
116 points
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2 Answers


If I understand your question right, when you were hired, you were awarded options to buy a certain number of shares of stock at a certain price. Those options vested over time. So, for example, perhaps you were awarded options to buy 48,000 shares of stock, vesting monthly over 4 years. So, after 1 month, you could buy 1,000 shares, after 2 months, 2,000 shares, etc.... (Or, alternatively, after 1 month, you could buy 48,000 shares, but the company could repurchase 47,000 of them at the same price you bought them for.)

What happens depends on the terms of your option. So, you have to look at your option agreement and the terms of the option plan.

There are two likely scenarios:

(1) Upon the acquisition of your company, the vesting on your unvested shares is accelerated, so you can exercise the full amount immediately prior to the acquisition. If that happens, then you get whatever a shareholder would get -- cash, the acquireror's stock or a mixture of both.

(2) Your options are exchanged for options to buy shares of the acquiring company.

Now, if the acquiring company is buying your startup for cash, chances are they will just want to buy you out -- there's often a provision in the plan to allow them to do that.

answered Apr 7 '12 at 05:08
Chris Fulmer
2,849 points


Hopefully great things happen, your options turn into stock which turns into cash.

I have never heard of "hiring options" though. Options are usually a complement to your salary, you get a certain number of shares, that vest over 4 years. So you eventually own those shares (if you exercise them), and when an acquirer comes along, they buy everyone's shares (hopefully). You win.

answered Apr 7 '12 at 03:23
Alain Raynaud
10,927 points
  • Is there a conversion rate/process of my stock options to the acquiring company's stock ? – Someone Somewhere 9 years ago

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