More from the Verge :: https://www.theverge.com/2019/4/5/18297619/amazon-eero-price-fire-sale-mesh-wi-fi-buyout
Not all exits are exits. 😉
Hardware is hard.
Now on to the mechanics.
Hard to know all the specifics but this is a common tactic when a large company acquires a smaller one. One way to buy something is pay enough money for it that all the investors, employees and founders make money. This could be a considered a normal deal but when a company isn’t doing well and owes money then lots of other things could happen.
What the deal looks like is Amazon paid just enough to get a deal approved and then incentivized the founders to take a lower overall price but made it up to them in their new employee deal. VC’s are pretty aware of this and early stage paperwork is sometimes drafted that tries to deal with this but in later stages an exit is sometimes an exit.
Looks like only real early investors made some money and the core team getting spiffed to stay at Amazon will do okay.
A bunch of other investors and even worse, employees are getting screwed. Looks like some employees will have paid for their options and have nothing but losses to show for it. Options can be wicked, especially in the USA – where one could even being paying AMT on their options but never realize a gain.
The way the USA deals with options sucks since the core premise is they can tax you on unrealized gains. Painful.
Again – I don’t know the specifics but if the founders or core execs are eventually going to be minted and a bunch of rank & file got screwed – that’s bad. But let’s be honest. Lay that blame on the founders – not Amazon or the VC’s since the founders ultimately accept the deal and they can negotiate or even give their pool or bonuses to the rank and file. That’s at their discretion.
Startups are hard and this is probably a more normal story than the ones of glorious riches and fame that we always seem to hear about.