Notes from Silicon Valley’s Best Kept Secret: Founder Liquidity
Extracts and notes from https://www.stefantheard.com/silicon-valleys-best-kept-secret-founder-liquidity/
Odds are your mental model of a silicon valley founder is someone who is obsessed with technology, someone who is all in, someone whose success is tied only to the success of their venture. However the reality is far more prosaic and practical. The article from Stefan, confirmed what I long believed. Founders are the only ones getting liquidity, so that they can cash out and take risk of the table while employees are not even aware that the liquidity event is happening.
A few select quotes from the article.
It undermines the narrative of the founder who is "all-in. The story of the founder who mortgaged their house and lived on ramen noodles for years is compelling. It garners admiration and sympathy, attracting top talent willing to work for lower salaries
Liquidity was not offered to any employees and the fact that this happened at all was only revealed to people on the cap table
WeWork - Neumann was able to cash out over 2B in secondary meanwhile not a single WeWork employee was able to capitalize on their equity stakes.
There are other stories like Hopin where the founder takes tens or hundreds of millions in secondary just to later sell the company for less than the liquidation preference stack and leave the employees with a grand total of zero dollars for their equity.
I wrote more about how the Hopin secondary sale worked here
God give me the grace to raise a billion dollars for my startup, the wisdom to sell 195 million dollars in the secondary market and walk out flush when the startup is finally sold for less than a 100 million.