Employee Approaching Liquidity Event
Congrats! You've helped build a massive company and an exit now looms on the horizon. Exits matter because they mark the point when you, your team, and your investors get to reap the financial benefits of all your hard work. We hear a lot about the “opening game” (pre-product/market fit) and the “mid-game” (hyper-growth), but very little about this “end game.” As a result, employees and founders miss opportunities or leave money on the table, right as they're about to cross the finish line. We'll break down the complexities of liquidity events and how an IPO actually works so you can plan ahead and make sure your persistence was well worth it.
For a startup employee, learning about your company’s initial public offering (IPO) is an exciting time. But it’s also overwhelming from a financial planning perspective. You have a variety of different equity grants, and you must decide what to do with each one. How many stock options should you exercise and sell, and when? What will your tax obligations be, and how can you minimize them?
Conventional wisdom says that startup equity is worthless. While most startups fail, there’s a chance your equity will become a life-changing pot of money. This guide explains how to make the most of your equity.
Planning for retirement often feels pointless. You’re young and your startup is taking off — why should you worry about retirement now?
Your venture backed company is growing and you are hearing rumors of a potential public listing. It typically takes a company 18-24 months to get itself into accounting shape to go public. That’s because as a public company, there will be a lot of new financial reporting and other regulatory requirements to satisfy. Often the company will hire a new CFO or other executive with public company experience to lead the effort to take the company public. Accounting practices will need to be updated to public company standards and financial controls must be implemented. During the pre-listing-but-very-likely-to-list period—let’s call it the pre-liquidity period—there are a few financial planning techniques that you should consider.
A tender offer is a structured event where the company or third-party investors offer to buy your shares from you for cash at some prevailing price. Often this accompanies a financing round where additional money is coming into the company. However, some companies do tender offers out of their operating profits. Tender offers are tightly controlled, with set timeframes, prices, and many regulations to be followed.