7 ms·
>I suspect i am going to echo a lot of the cynicism that has been surrounding the high rollers startup coverage lately, but quite frankly... why would they go p
by quanticle 11y ago
>I suspect i am going to echo a lot of the cynicism that has been surrounding the high rollers startup coverage lately, but quite frankly... why would they go public?
For non-founder employees, the implicit deal with working for startups has always been, "We pay you below market wages, but make it up in equity. Then, when we go public or get bought, your equity stake turns into a cash-out that makes up for your years of below market wages." If a startup plans to remain a private business forever, then it's no longer making that implicit deal, and therefore will probably have to pay market wages (i.e. the same wages as Google or Apple) in order to retain employees.
EDIT: This is why I always ask about the company's exit strategy during the interview. If they're not planning to get acquired or go public, then I know I have to make adjustments in the structure of the compensation I ask for accordingly.
- fsloth 11y agoThere is the possibility of being bought by a larger company. I've known technology startups have this as the main exit strategy and succeeded.
- benmanns 11y agoOr the possibility of being profitable and paying dividends to owners like companies have done for centuries before now.
- maneesh 11y agowhat do you mean??
- ethanbond 11y agoIt's possible to simply pay your shareholders out of your profits based on their stake. I have no clue why people think IPOs are the only way to go liquid.
- tryitnow 11y agoIf a company is financially mature enough to pay dividends then it's mature enough to go public. And going public does enhance your value - ceteris paribus. When we talk about "liquidity" we're talking about the ability to sell your assets, not the ability to derive a cash income (dividend) from it. And a share in a public company is almost always going to be more liquid than a share in a private company.
- ethanbond 11y agoAh, good points. Thanks for the clarifications!
- tankenmate 11y agoAnother point you need to consider is that private acquisitions typically cost a 15% to 30% discount on the P/E multiple compared to their public brethren; liquidity (in this case convenience liquidity) costs money.[0] [0] http://www.sciencedirect.com/science/article/pii/S0304405X06001966 http://www.sciencedirect.com/science/article/pii/S0304405X06...
- brianwawok 11y agoIf you don't found in the valley, Market wages look a lot better.