Weinberg: Founders should sell under 5% of equity in secondary sales
Zach Weinberg · 20VC: Zach Weinberg on Whether A Company is a Democracy, The Importance of Ownership, The Rise of Pre-Emptive Rounds, Multi-Stage Funds Entering Seed and How he Approaches Both Risk and Personal Capital Allocation · Nov 6, 2020 · at 21:24
Zach Weinberg, co-founder of Operator Partners and Flatiron Health, shares his benchmark for how much equity startup founders should cash out during growth rounds.
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“For the founder, I encourage them to take enough money off the table that they're comfortable taking a big swing at a bigger outcome. And for some people, just to put some numbers against it, some people, that's a million dollars. Because remember, you're going to pay taxes on this stuff. For some people, as they get bigger, that's a few million dollars. And for others, maybe it's like inching closer to 10. And these are giant numbers for the vast majority of People in America. So we want them to be comfortable and then focused. And we just have a conversation about what is that number? What does it mean to you? And usually it's like less than five percent of their total stake would be a nice benchmark because you want them to feel like there's material upside left. And that's why they're going to put in the effort.”
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