Meditations
EquityZen's Blog On Startups and Their Economics

Q&A with Troy Paredes: How the SEC Regulates Silicon Valley (Part 2)

Shriram Bhashyam | April 13, 2017

The change in administrations at the White House has multifold ramifications for startups. Important among those areas is the Securities and Exchange Commission’s (“SEC”) posture towards Silicon Valley and how that agenda may shift under incoming Chair Jay Clayton. We’ve tapped friend of EquityZen, and former Commissioner at the SEC, Troy A. Paredes to shed some light. You can read Part 1 here .

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Q&A with Troy Paredes: How the SEC Regulates Silicon Valley (Part 1)

Shriram Bhashyam | April 05, 2017

The change in administrations at the White House has multifold ramifications for startups. Important among those areas is the Securities and Exchange Commission’s (“SEC”) posture towards Silicon Valley and how that agenda may shift under incoming Chair Jay Clayton. We’ve tapped friend of EquityZen, and former Commissioner at the SEC, Troy A. Paredes to shed some light.

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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.
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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.
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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.

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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.

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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.
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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.
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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 )

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Dollar Shave Club, Jet.com, 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), Jet.com (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 .

Jet.com


Jet.com 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


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 .
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