EquityZen's Blog On Startups and Their Economics

FinTech Outlook: Five Developing Issues to Watch in 2017

Lee Schneider | January 26, 2017

FinTech investment, innovation, and media attention has grown steadily in recent years, and do not look to abate any time soon.

We’ve tapped friend of EquityZen, and FinTech lawyer, Lee A. Schneider, to opine on FinTech regulatory trends to watch in 2017.

Each new year comes with a sense of excitement and anticipation.  Let's wipe the slate clean from last year and focus on five trends FinTech companies and investors should monitor in 2017.

Trump's Nominee for SEC Chief: Implications for Startups and Fintech

Shriram Bhashyam | January 19, 2017

On January 4, 2017, President-Elect Donald Trump nominated Jay Clayton, a private sector Wall Street lawyer, to serve as the next Chairman of the SEC. While the confirmation hearings will tell us a lot about Mr. Clayton’s background, qualifications, and leanings, I can’t wait that long and preview here what the SEC’s agenda may look like in his tenure.

Demystifying the Option Agreement

Abad Mian | January 12, 2017

Your Stock Option Agreement. If you work at a startup, you’ve probably got one. It lays out what you can and can’t do with your stock options , which happens to be a very important component of your compensation. But do you understand how an Option Agreement really works? Luckily, EquityZen is here to help.


How to Hedge Against Private Company Valuations

Atish Davda | January 05, 2017

"How can I hedge against private company valuations?"
"Can I short pre-IPO shares?"
"How do I lock my shares’ current price?"

I often get variations of these questions. The answer is "no" – but, I usually point out other ways to enhance the private market portfolio. I thought EquityZen’s client base might find them interesting, so below are some ideas. If you have ideas on the matter, please send them my way via a comment or email.


Tech IPOs and Trump

Nat Disston | December 08, 2016

This election has not been short of surprises, and the stock market is no exception. With the Dow and S&P 500 reaching record highs on Wednesday, it seems the market has recovered from the uncertainty we had just one month ago. That said, the President-elect doesn't step into the White House for another month and a half. It's to be determined if we see another shift after January 20th once the the rubber hits the pavement.

Until then, Trump has shared (some of) his plan as president, and as he appoints his administration, the market will adjust. Based on what we know, we expect the impact to be a mixed bag for tech companies and their IPO plans during the Trump presidency.

Happy Thanksgiving from EquityZen

Ketan Bhalla | November 24, 2016

Keeping with EquityZen tradition, we'd like to take a few moments to reflect on the past year and share a few things we are thankful for as we celebrate the Thanksgiving holiday here in the United States.  EquityZen hit some major milestones in 2016, including completing over 1,000 transactions in over 50 companies.  We believe it was a transformative year for the company and the private markets as a whole.

Further development of the private markets

Awareness about the investment opportunity in private markets got a well deserved boost in 2016, which we are thankful for.  There were numerous articles in the press about pre-IPO investing, many of which we were actually featured in , which gave increased credence to the market as a whole.  A major tax break for startup founders, employees, and investors was also made permanent , which we believe is a positive sign for an evolving market.  Though it was painful, the public market downturn at the beginning of the year actually gave many investors and shareholders an opportunity to look at their public equity portfolios and consider rebalancing some of their risk into private companies , which was a catalyst for investors wanting to learn more about the asset class.  Finally, the fact that a private investment platform got featured in Forbes as part of the inaugural "Fintech 50" lent even more credibility to the market.

Flat is the new up. Or you can fire a bunch of people (it's just way less cool.)

Phil Haslett | November 10, 2016

"We're gonna bring in some entry-level graduates, farm some work out to Singapore, standard operating procedure."

Kudos to Postmates. Raising a $140M round in a crowded space (food delivery) right now is no easy task. Even at a flat price to last year's valuation, I still applaud CEO Bastian Lehmann's ability to get fresh capital ( from a returning VC investor , no less) in the current fundraising environment.

“Flat is the new up,” co-founder and CEO Bastian Lehmann jokes in an interview with Fortune.

But I think Postmates' flat round is a symbol of what's happening elsewhere in Startupland. There's a lot of cost-cutting going on . Hear me out.

Let's make one assumption about all late-stage, venture-backed startups:

Assumption #1: Startups are burning cash (costs are exceeding revenue)

If we assume ^^ is true, then you can do 1 of 2 things to avoid going extinct:

Option #1: Raise more money!
Option #2: Spend less

Bastian went with Option #1: raising money . In fact, it would appear he spent the better part of a year doing so. Here's a timeline.

November 2015.

Then April 2016.

Still, no money. Then in September 2016...could it be?!?!

And finally, in November 2016:

So if you asked Bastian to visualize his year at Postmates in 2016, he'd probably just show you this:

(Or maybe he took 101. Guess it depends on traffic.)

Bastian took the hard route. He pounded the pavement, showed investors that he has a way to turn a dollar into two (hopefully soon), and was willing to optimize for cash (before he ran out) over valuation. So that's Option #1.

Option #2 is to spend less. Which is happening a lot right now but it was waaaaaay less exciting to write about, or to read about.

Cost cutting is incredibly dull and unsensational. And yet so….pragmatic! Little costs add up ( check out how HotelTonight saved $8,000 just by...asking nicely ). And silly costs add up, too (just ask Dropbox about their LIFE-SIZE chrome panda that cost a cool $100K ).

But chrome pandas ain't got sh*t on how expensive humans are. People are effing expensive . Know how I know? For one, I'm a founder (and I love our team to bits). For another, just look at all these well-established startups cutting headcount recently:

Now, you may be thinking "jeez, what a bunch of ruthless, good-for-nothing, entitled CEOs just taking away the livelihoods of those hard-working engineers/content-managers/SEO-wizards/support-ninjas*." And that's a very natural reaction to have.

But really y ou should be proud of them for firing people . For reducing their headcount. For making a really, really, really hard decision that will impact them emotionally (not all founders are robots). Layoffs don't increase the popularity of any CEOs, but they give companies a chance to survive, and to hopefully be 10x the size they are now, and to hopefully allow you to continue getting General Tso's chicken to your doorstep on Sundays when you're just not in the mood to walk.

So is "flat the new up" ? No. But it's a good reminder that startups are taking action so that they can fight another day.

(* Side note: there are currently 76 Ninja job openings in the San Francisco Bay Area )


Dollar Shave Club,, and Nutanix: Paths to Exit

Ketan Bhalla | September 22, 2016

We recently published three new infographics regarding the exits of Dollar Shave Club (acquired by Unilever), (acquired by Walmart), and Nutanix (recently set the terms and price for their IPO).   Take a look to see what these events mean for the major investors of the company - you might be surprised by some of the outcomes.

We regularly publish these infographics to help illustrate the impact of funding rounds for early investors in an effort to "demystify" startup funding.

Dollar Shave Club

Unilever agreed to buy Dollar Shave Club for $1 billion in July of this year. According to Unilever , part of the reason they bought the company was for their "unique consumer and data insights" and because they believed Dollar Shave Club was the "category leader in its direct-to-consumer space".  Forerunner Ventures, who lead the company's seed round, will realize a 49.7x return when the deal official closes.  See full infographic here . was acquired by Walmart for over $3 billion.  The deal officially closed this past Monday - Doug McMillon, President and CEO of Walmart, announced the official closing via a blog post on the company's website.  The acquisition resulted in a 9.2x return for investors in Jet's Series A round, including New Enterprise Associates which acted as the lead investor in the round.  See full infographic here .


Nutanix officially priced their IPO on Monday, setting a range of $11 to $13.  At the midpoint of the range, the $1.64 billion valuation at IPO would be slightly lower than the valuation of the company in August 2014, when they last raised funding.  Assuming the midpoint of the pricing range, the Series D investors would recognize a 2.5x return on their investment at IPO.  See full infographic here .

Announcing EquityZen 2.0

Ketan Bhalla | September 08, 2016

The team at EquityZen has been hard at work over the past few months working on a slew of product features and improvements to further bolster the customer experience for all of our clients.  These features have ranged from small improvements to major product releases. We are excited to highlight some of the most impactful changes here.

EZ Advantage

Arguably our most exciting new feature is a tool that allows users to search across an entire universe of private companies to conduct their own due diligence.  We’ve made it easy (or should I say “EZ”?) to filter the universe by Sector, VC Investors, Total Funding, and even the age of the company.  Want to learn more about a few three-year-old companies backed by Khosla Ventures in the gaming industry?  Head over to EZ Advantage and apply your filtering criteria.  After selecting a few companies from the filtered results, you can compare their important metrics side-by-side, giving you quick access to key details about the companies that meet your criteria.

Support for multiple investment accounts

We have a lot of clients that want to complete transactions across multiple entities, such as a personal account and a trust that has been set up for their beneficiaries.  Previously, the process for doing this was a bit tedious – our clients had to set up separate accounts with limited connectivity between them.  We’ve drastically improved upon this feature – you can now easily make investments across multiple accounts from a single location and receive aggregated reporting on your holdings across multiple entities.  It makes it much easier to complete transactions and also gives you a full view of your investments across multiple user profiles. Financial Advisors with investment discretion on behalf of their clients should also find this useful.

Personalized News Updates

One of the things we strive to do is provide prompt updates on any companies in which you have either expressed interest or made an investment.  We’ve created a new section on the EquityZen platform called “ My News ”, which gives you personalized updates on such companies.  It’s easy to search for specific company news or browse all the recent news related to companies on your “ Watchlist ” (see next section) without needing to dig through piles of unread e-mails in your inbox.


We majorly overhauled the “ Watchlist ”, which is a central location for you to manage which companies you are interested in.  Once you express interest in a specific company, we will automatically add it to the “ My Watchlist ” section of your account.  We’ve given you the ability to give us more information related to your interest, including whether or not you are looking to transact at a specific valuation.  It’s also easy to see which companies are now accepting investments on the EquityZen platform, allowing you to view additional information related to the opportunity quickly and efficiently.  Not interested in a company anymore?  Remove it from your Watchlist and we won’t provide updates to you anymore.

Document Library

Trying to look for all the documents you’ve ever signed related to your transactions?  Need them before tax season comes around again?  We figured.  We have always given you a central repository of documents related to your transactions within your profile, but we’ve made it even easier now.  Everything is consolidated in one location called “ My Documents ”, so you don’t need to look for them on a specific transaction-by-transaction basis.

Navigation Changes

We’ve made it easier to access some of the most important pages on our platform, including updates about your investments and the vast amount of market research that we have produced and curated.  We eliminated redundant links and simplified the overall navigation for all users.

We hope you are as excited as we are about some of these new features and encourage you to give us feedback on our investment platform.  We are constantly trying to improve upon the way that private market transactions are completed, and believe we have come a long way in a short amount of time.

A special shout-out to our development team for their hard work in building, iterating, and releasing all of these great new features.


Six Months Later: The Pre-IPO Investment Opportunity in an Up Market

Kaylock Yam | September 01, 2016

Key Takeaways:

  • Pre-IPO investments can be a core part of the growth equity allocation of your portfolio in all market environments
  • Recent indicators support the case for considering adding pre-IPO investments today following the upward movement of public equity markets over the past six months

You wouldn't have predicted this six months ago.

On February 18, we published a post titled " The Pre-IPO Investing Opportunity in a Down Market. " The S&P 500 and NASDAQ Composite were fresh off declines of over -7% and -11%, respectively, to start 2016. The stock prices of certain public tech companies had plummeted after poor earnings announcements. Where was a U.S. equity investor to go?

Chart 1: S&P 500 Index and NASDAQ Composite
(Feb 16, 2016 - August 31, 2016)

Source: Google Finance

Since the week of our post, public equity markets in the U.S. have rallied (Chart 1), and the tech sector has performed well. The lesson? When making long-term investment decisions, past performance, especially that of the recent past, of an asset class or sector is not necessarily indicative of future results.

Invest. Or invest not.

Investing is filled with over-simplified advice, one of the most long-standing examples being that market timing doesn’t work. While there is a class of investors and traders that would argue against that belief, the fact remains that making an investment is often more important than when you make the investment. This can be true in public equity markets and certainly applies in private markets.

In February, we wrote about pre-IPO investments as a way to diversify your investment portfolio (see our post “ Why Alternatives Should Be Part of Your Investment Portfolio ”). How should you think of pre-IPO investments after a period of upward movement in public markets?

Investing for Growth

Pre-IPO investing is first and foremost a growth investment.

It’s been widely reported that market returns are shifting from public markets to private markets. Companies are staying private longer, and names like Uber ($63B), AirBnB ($30B), and Pinterest ($11B) are generating value for their private investors and raising “quasi-IPO’s” – $100M+ private funding rounds. 1

Chart 2: U.S. VC-Backed Tech IPOs vs. Private Tech IPOs

Source: CB Insights

One way to capture this upside potential, therefore, is to allocate to the private markets.

With an eye to the future, here are a few indicators supporting the case for pre-IPO investing as part of the growth allocation in your portfolio today:

1. Strong Tech Earnings
Technology was the bright spot in an otherwise lackluster second-quarter earnings season and is currently the standout sector showing promising third-quarter expectations, particularly on the heels of strong performance reports from Alphabet (Google), Facebook, and others.  While strong earnings from specific public companies does not necessarily mean that private companies will perform similarly, these are the companies in whose footsteps current private companies seek to follow.

2. Uptick in M&A
Global tech M&A revenue has reached $1.9 billion this year, according to Dealogic. In the past few weeks alone, activity has picked up significantly – both public and private companies are getting scooped up in deals like Verizon-Yahoo, Didi-Uber, Tesla-SolarCity, Walmart-Jet, and Unilever-Dollar Shave Club. Buyers are out there, which is a good sign for growth-oriented investors.

3. Multiple Expansion
Public investors have shown they are willing to pay more per dollar of revenue (or dollar of earnings) for tech stocks. 2 This has positive effects on private tech companies and their prospects of commanding higher valuations in any type of near-term exit (acquisition or IPO). Twilio, which went public in June at a revenue multiple of 6.4 and now trades significantly above its $15 per share IPO price, 3 is an extreme example.

Traditionally, investors have turned to assets like foreign stocks and real estate for growth. Given current uncertainties in global markets and property values, pre-IPO investments deserve a look.

3. Revenue multiple based on company valuation of $1.23 billion at $15 per share and $193 million in trailing-12-month revenue as of March 31, 2016. See:


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