😇 How tech companies like AngelList and EquityZen are leading the way for liquidity alternatives
Growing startups that wait a long time to go public sometimes face the problem of shareholder equity. Fortunately, there are new ways to handle it.
It goes like this: Employees who have vested stock options at thriving startups feel like they can’t leave. They either can’t afford to exercise the options or deal with the ensuing tax bill. Companies also don’t want to let employees freely sell the stock, believing it could confuse their equity capitalization tables.
But improved solutions are here: As Axios points out, outside companies help private startups act more like publicly-traded companies by letting employees sell back equity on a private platform.
AngelList (a Lawtrades customer) is hosting a platform for the startup Pipe: It’s part of the company’s secondary stock sales service. EquityZen, another Lawtrades customer, specializes as a pre-IPO equity platform.
The liquidity alternatives provided by the likes of AngelList and EquityZen are seen as beneficial for employees who cannot typically cash in on equity, no matter how long they’ve been at a private startup or what kind of financial needs they may have. Pipe CEO Harry Hurst said, “We’ve seen the evolution of capital come in and position themselves as ‘founder friendly’—I think the next phase is for founders to be more ‘team friendly.’”