5 ms·

I'm sorry for being dull, but how does what you described translate to a business opportunity?

choppaface 6y ago
There's a lot of demand for pre-IPO stock. Facebook was selling on the private market for ~$40-$45 per share before listing at $38. Uber had a similar run-up. Carta provides some equity tools for start-ups (at least, I've used their 83b product) and they want to expand to be a marketplace for helping sell that stock. Forge Global is similar operation (if you create an account there btw they were giving free Crunchbase data for a while). These equity transactions aren't as simple as buying and selling an ETF though. Moreover, most of the existing sales have been private, so sellers (e.g. accredited investors) and buyers (e.g. employees and founders) are at a steep information disadvantage when jumping into these deals-- Carta and Forge know the consequences, but the market participants do not. Moreover, the space isn't necessarily well-regulated. So that's a prime business opportunity: you have people who are too "dumb" to create a market themselves, but who want to transact. The snark in my narrative comes from personal observations that it's very easy to get burned (even in successful exits) and that these middlemen are typically even less trustworthy than big banks.
- cetico 6y ago
  What are, in your opinion, things that startup founders should do to make things more financially rewarding for employees? Any low hanging fruits you suggest we look at first?
  - bagels 6y ago
    Pay more money? Allow employees to include their shares in a round?
    - brianwawok 6y ago
      The more you pay, the shorter your runway. It’s a balancing act like most things in business.
      - dnhbt 6y ago
        >The more you pay, the shorter your runway. The horror of asking a company to charge customers to finance their operations rather than running the VC treadmill. I don't get how more founders don't realize it is in the VC's best interest to keep you on the treadmill, burning their money and giving away your equity.
  - choppaface 6y ago
    I am certainly biased but I would like to see the minimum employee comp package include: * 83b election standard with employee on-boarding paperwork. * Bonus of up to one year salary to cover 83b early exercise costs. * Employee equity pool size disclosed along with 409a. Ideally contractual protection for the employee equity pool. * Offer documents must include a 409a valuation and share price. (I have gotten multiple offers with just a number of shares. And in one case the company was literally peddling a false valuation in my offer). * 401k with company match, even for a small company. Lottery ticket is not a retirement plan. Ideally in my mind: * Employees get convertible debt that is either as senior as investor debt or pays a 5% dividend. * Double standard employee pool to 20%; keep 30% founder pool size. * No ISOs or non-quals ever. Extremely tax toxic, and employees can actually get driven into debt from the job. Options should be outright forbidden for comp packages under $1m / year. The tax games are absolutely not worth it. The main way any positive change can happen is for employees either to negotiate for it during offers or for founders to just start doing it to be more competitive. One might argue that Carta has made 83b easier by chasing a private stock marketplace... perhaps there are other mechanisms for change.
    - jasode 6y ago
      >Ideally in my mind: - Employees get convertible debt that is either as senior as investor debt or pays a 5% dividend. I don't think this is financially realistic. Most employees (especially non C-suite executive employees) do not want to loan money to a startup to receive a "convertible note/debt". Even if employees wanted to loan money, most don't have the discretionary play money in their bank account to risk on a startup. It's the investors that have the money and risk appetite to pay for convertible notes. If you meant that employees should receive convertible notes even without paying anything (no loan)... then I think "convertible debt" is the wrong label to describe this transaction that you're proposing.
      - lukeschlather 6y ago
        > If you meant that employees should receive convertible notes even without paying anything (no loan)... then I think "convertible debt" is the wrong label to describe this transaction that you're proposing. How would you describe it? Note that the OP said "employees get convertible debt notes" not "employees buy convertible debt notes." Practically speaking the notes are indistinguishable from convertible debt that investors get, but they're compensation for employment rather than bought.
heimatau 6y ago
Being a money-changer is very lucrative, it's not noble nor constructive but it is lucrative.

There's a lot of demand for pre-IPO stock. Facebook was selling on the private market for ~$40-$45 per share before listing at $38. Uber had a similar run-up. Carta provides some equity tools for start-ups (at least, I've used their 83b product) and they want to expand to be a marketplace for helping sell that stock. Forge Global is similar operation (if you create an account there btw they were giving free Crunchbase data for a while). These equity transactions aren't as simple as buying and selling an ETF though. Moreover, most of the existing sales have been private, so sellers (e.g. accredited investors) and buyers (e.g. employees and founders) are at a steep information disadvantage when jumping into these deals-- Carta and Forge know the consequences, but the market participants do not. Moreover, the space isn't necessarily well-regulated. So that's a prime business opportunity: you have people who are too "dumb" to create a market themselves, but who want to transact. The snark in my narrative comes from personal observations that it's very easy to get burned (even in successful exits) and that these middlemen are typically even less trustworthy than big banks.

cetico 6y ago
What are, in your opinion, things that startup founders should do to make things more financially rewarding for employees? Any low hanging fruits you suggest we look at first?
- bagels 6y ago
  Pay more money? Allow employees to include their shares in a round?
  - brianwawok 6y ago
    The more you pay, the shorter your runway. It’s a balancing act like most things in business.
    - dnhbt 6y ago
      >The more you pay, the shorter your runway. The horror of asking a company to charge customers to finance their operations rather than running the VC treadmill. I don't get how more founders don't realize it is in the VC's best interest to keep you on the treadmill, burning their money and giving away your equity.
- choppaface 6y ago
  I am certainly biased but I would like to see the minimum employee comp package include: * 83b election standard with employee on-boarding paperwork. * Bonus of up to one year salary to cover 83b early exercise costs. * Employee equity pool size disclosed along with 409a. Ideally contractual protection for the employee equity pool. * Offer documents must include a 409a valuation and share price. (I have gotten multiple offers with just a number of shares. And in one case the company was literally peddling a false valuation in my offer). * 401k with company match, even for a small company. Lottery ticket is not a retirement plan. Ideally in my mind: * Employees get convertible debt that is either as senior as investor debt or pays a 5% dividend. * Double standard employee pool to 20%; keep 30% founder pool size. * No ISOs or non-quals ever. Extremely tax toxic, and employees can actually get driven into debt from the job. Options should be outright forbidden for comp packages under $1m / year. The tax games are absolutely not worth it. The main way any positive change can happen is for employees either to negotiate for it during offers or for founders to just start doing it to be more competitive. One might argue that Carta has made 83b easier by chasing a private stock marketplace... perhaps there are other mechanisms for change.
  - jasode 6y ago
    >Ideally in my mind: - Employees get convertible debt that is either as senior as investor debt or pays a 5% dividend. I don't think this is financially realistic. Most employees (especially non C-suite executive employees) do not want to loan money to a startup to receive a "convertible note/debt". Even if employees wanted to loan money, most don't have the discretionary play money in their bank account to risk on a startup. It's the investors that have the money and risk appetite to pay for convertible notes. If you meant that employees should receive convertible notes even without paying anything (no loan)... then I think "convertible debt" is the wrong label to describe this transaction that you're proposing.
    - lukeschlather 6y ago
      > If you meant that employees should receive convertible notes even without paying anything (no loan)... then I think "convertible debt" is the wrong label to describe this transaction that you're proposing. How would you describe it? Note that the OP said "employees get convertible debt notes" not "employees buy convertible debt notes." Practically speaking the notes are indistinguishable from convertible debt that investors get, but they're compensation for employment rather than bought.

heimatau 6y ago

Being a money-changer is very lucrative, it's not noble nor constructive but it is lucrative.