Silicon Valley's best kept secret: Founder liquidity
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Silicon Valley's best kept secret: Founder liquidity
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Re: Silicon Valley's best kept secret: Founder liquidity
#2I’d also push for allowing early exercise along with secondary sales restricted only by a short right-of-first-refusal period.
Re: Silicon Valley's best kept secret: Founder liquidity
#3Having only worked for larger companies (RSU stage), I'm curious what the typical breakdown of founder to early employee to investor to later employee equity looks like. I'm sure it differs pretty wildly, but I'd love to know what a 'typical' case for mid-to-late-stage start up looks like.
Re: Silicon Valley's best kept secret: Founder liquidity
#4Love the movement and glad there are founders out there pushing the envelope for their team.
(aside: 51 points but only 1 comment? It's a front-page worthy article, but sort of feels like there's some vote gaming happening. I've never seen 50 points w/ 1 comment.)
Re: Silicon Valley's best kept secret: Founder liquidity
#5Hmm, I’ll be controversial. Twinned secondaries, i.e. secondaries tied to a primary, are almost always a give away to senior management and the buyer. (They’re frequently syndicated at double-digit spreads.)
If the company sucks, senior management gets cash back first while the investor gets top-of-stack liquidation preferences. If the company is doing great, the investor gets to buy stock at a price almost always lower than market.
They’re common in Silicon Valley, because they’re good for founders and the Board members. But they’re rare in public markets. The closest thing I can come up with is the current clusterfuck with Shari Redstone.
Re: Silicon Valley's best kept secret: Founder liquidity
#6The best startups have a concept which is summed up thusly:
“We all go to the pay window at the same time.”
It’s ok for founders to take a little bit of money off of the table if they extend that to their employees as well. Asymmetry is where things get weird.
I’ve seen many founders who got deep into the fundraising cycles without ever realizing they could take a cent out. VCs will constantly tell you to let it all ride, and sometimes that works out, but for most people, having a little bit of financial security while you’re trying to change the world is necessary.
The best startups figure out how to manage liquidity through financing in a way that aligns incentives, keeps the goalposts at the mission, while allowing their teams to thrive.
It’s about alignment. If everyone is pulling in the same direction you’re going to execute the vision. Whether you win in the startup lottery is up to the threads of fate, but alignment is the straightest path towards a result.
Re: Silicon Valley's best kept secret: Founder liquidity
#7I’d also push for allowing early exercise along with secondary sales restricted only by a short right-of-first-refusal period.
> allowing early exercise along with secondary sales restricted only by a short right-of-first-refusal period
Do you mean cashless exercise?
Re: Silicon Valley's best kept secret: Founder liquidity
#8Only a small percentage of tech companies raise a series A or beyond.
To me, this just seems like a capital-efficient alternative to the founder increasing their salary that could be negotiated. I had no such perception that this was some “secret” thing, I assumed it happened since you can do whatever you want if the investors and founders agree that it makes sense.
Re: Silicon Valley's best kept secret: Founder liquidity
#9[deleted]
Re: Silicon Valley's best kept secret: Founder liquidity
#10Love the movement and glad there are founders out there pushing the envelope for their team. (aside: 51 points but only 1 comment? It's a front-page worthy article, but sort of feels like there's some vote gaming happening. I've never seen 50 points w/ 1 comment.)
That's actually a lot more common than people assume it is, and comments like "I can't believe there are X points but only Y comments" are more common than you'd think they'd be as well!
My theory is that it's a sign of a good article, because more energy is going into reading it than into posting quick comments (which are usually less valuable comments). But I don't have the data.
Edit: well... we have the data (to test this), but it would be enough of a pain to do the analysis that other things will probably take precedence forever.