The Ledger
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Startups that quietly lay off 50% of their staff are going to zero
“If a company just fired 50% of its people quietly, it's going to zero.”
Taxing illiquid paper gains on startup stock option exercises is structurally unfair
“Then there is the tax cost, which is the tax that is actually associated with the act of exercising. That is typically applied to the paper gain between the current board approved fair market value of the stock as of the moment you're exercising and whatever y…”
Venture power laws demand broad indexing rather than attempting to pick winners
“The way that we think about the power law is, one, it's real. Most of the returns are gonna be driven by the big generational companies. Two, picking winners is very hard. Combining those two points, you need to be in every credible deal.”
70% of startup employees abandon their stock options upon departure
“At the moment, around 70% of employees abandon their stock options, and employees tend to own 10 to 15 points of the cap table of a given startup.”
Startup employees frequently mishandle their equity and tax obligations
“If somebody with my background at this point in the game is screwing up startup equity, I'm sure your average startup employee is also probably screwing up their startup equity.”
Traditional option lenders ignore rank-and-file employees for multi-million dollar executives
“What we saw was the commonality between all of them. I just described a very crowded market was that they were all focused on senior people that were leaving really late stage private companies. And so if you need twelve million dollars and you just left Strip…”
Financing employee stock options creates proprietary data on opaque private companies
“If you help a broad base of startup employees, you will end up with a ton of differentiated data on private companies that may or may not be out there in the world otherwise.”
State tax and labor filings provide directional performance signals for private startups
“For idiosyncratic VC backed startups, they're never particularly accurate, but they also have a lot of signal in the trend. They're always consistently inaccurate for the same company, and so if they go up, that means something.”
Hiring a non-founding sales team indicates repeatable product-market fit
“If a company just hired its first non-founding sales team, that means they found product market fit, and it's on repeat, and they can get the founder out of their sales job.”
Automated LinkedIn tracking identifies startup employees entering 90-day option exercise windows
“We are sitting on top of job website data, think of LinkedIn, and we are paying attention to the employees of the companies that we like, and as soon as we see they update their bio in some relevant way, specifically by putting an end date Next to their tenure…”
Future competition in option financing will inevitably compress equity purchase discounts
“Eventually competition will come It'll erode our purchase discounts.”
Private secondary markets remain anemic because institutional buyers lack broad startup data
“The secondary markets for private shares right now are totally anemic. Maybe a hundred late stage companies Stock trades. The primary reason that's the case is because the buy side on these markets just don't know anything about the other 30,000 venture backed…”
BlackRock's acquisition of Preqin signals upcoming private equity index products
“BlackRock just bought Prequin, and they're going to be putting out private equity index products first”
Companies facing acquisition freeze spending to preserve revenue multiples
“Usually you don't spend any new money when you're being acquired, because every dollar that goes out the door has some revenue multiple attached to it.”
Departing startup employees typically need $50,000 to exercise expiring stock options
“The capital use case that was the dominant capital use case that came inbound from our user base was, do you have 50 grand? I need to not lose my equity.”
Employee option financing accesses startup common stock at discounted 409A valuations
“Specifically, we can get exposure to the common stock that they're buying usually at the independently produced company board approved fair market value of that company's common stock, which tends to incorporate a Discount for lack of marketability because com…”
Late-stage unicorns run internal tender offers, bypassing external secondary markets
“Series F plus, those are the companies that are more likely to have proper secondary markets that OpenAI, Stripe, and SpaceX, and they will do tenders for their employees, and so it really is few and far between that those deals make their way into our portfol…”