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I completely disagree. Equity ownership in private companies can be a fantastic thing, and create tremendous wealth, even with no contemplated liquidity event.
by cascom 5y ago
I completely disagree. Equity ownership in private companies can be a fantastic thing, and create tremendous wealth, even with no contemplated liquidity event.
Just ask partners in law firms or consultancies, or ask yourself if you’d like to own stock in Cargill, IKEA, Mars, Brown Brother Harriman, Bloomberg, Chik-fil-a, fidelity, etc.
- pavlov 5y agoIf the private company is set up with the culture and explicit governance that makes sure minority shareholders get a cut of profits, then sure. But the average private tech company isn’t like that. There’s probably 2-4 founders who pay themselves extravagant salaries and control all voting shares. Minority equity never gets a payday.
- somethingAlex 5y agoThe type of consultancies and firms which actually pay out profit based on equity are usually LLP's / partnerships (part of the reason why "Partner" is a title in finance, law, etc. Tech companies are usually corporations (often C corps in the startup world.) What equity gets you in the two scenarios is completely different.
- cascom 5y agoSorry, the company type has (LLC, LP, LLP, c-Corp, s-Corp, etc) has literally nothing to do with that. Tech start-ups are typically incorporated as c-corps as their structure makes it easier to grant options, startups don’t want to make tax distributions if they make money, LLCs can’t issue preferred shares, and s-corps can’t have more than 100 shareholders, etc. just to name a few. No one at Cargill or Bloomberg thinks twice about whether the equity is in a c-Corp to LP (all else’s being equal)