Startup employees which took a pay cut in exchange for equity are going to be the biggest losers. At least VCs and private equity have some level of protection against a decline in valuation from their preferred shares/liquidation preferences. It won't protect them against bankruptcy, but it is a lot better than nothing.
Employee's generally don't have that type of protection, and the liquidation preferences also decrease the value of the common shares after a down round. So even with a relatively modest decline in overall valuations, a lot of employees are going to end up with worthless options/shares after a down round.
Employee's generally don't have that type of protection, and the liquidation preferences also decrease the value of the common shares after a down round. So even with a relatively modest decline in overall valuations, a lot of employees are going to end up with worthless options/shares after a down round.