Equity Clawbacks: How to Avoid a Zynga Situation
by Ben D. Orlanski
Inc.com
November 23, 2011
The dazzling prospect of the “100x” return has brought billions of dollars of venture capital—and some of the greatest minds and employees—to the most innovative and promising companies in the history of commerce.
For investors, the risk/reward equation, short of all the complexities of negotiating preferred stock and deal terms, comes down to actual dollars invested in very risky ventures. The risk/reward equation for employees (who also make an investment, but in the form of time and talent) is more difficult to pin down. You can see this difficulty play out in the equity clawback drama allegedly unfolding at online gaming start-up Zynga. It raises a fundamental question about employee equity: What is the deal?
Read the article here.