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EquityZen has curated this list of quality resources for secondary investors, shareholders and company representatives.
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EZ on TV: WeWork Woes

WeWorkCNBCCheddar

Michael Wenner   August 01, 2019

Yesterday, two members of the EquityZen team were on TV discussing WeWork's upcoming IPO. Check out what they had to say!

 

CEO Atish Davda on CNBC.

 
 
 
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Tech's New Workout Plan: Peloton vs. Mirror vs. ClassPass

PelotonClassPassMirrorSoulCycle

Michael Wenner   July 18, 2019


1 and 2 and 3 and 4 and get them startups right...A new crop of tech companies has set their eyes on the exercise industry, a space that has long seen little movement in business models and offerings. The new focus on the health and wellness industry is in part due to changing spending habits by Americans.

In a 2017 survey, American adults were spending $155 per month on average on health and fitness. As a result, it’s not surprising that startups, like Peloton, Mirror, and ClassPass are vying to capture this health conscious demographic. Below, we’ve provided an overview of the three leaders in this burgeoning space.

Peloton

Peloton has taken the excitement of a spin class and brought it into the comfort of your home. Their signature product is a stationary bike with an electronic screen that can stream both live and on-demand spin classes and bike workouts. Although it has a steep price tag of $2,245 on top of a $39 monthly membership, it has gained a cult following and has now surpassed the membership of the spin class giant SoulCycle.




Peloton was born out of the vision of bringing the experience of fitness classes to people who couldn’t fit the schedules of traditional workout class times into their daily routines. Although Founder John Foley had a hard time raising capital in the beginning, Peloton has raised almost $1 billion in funding and is valued at over $4 billion.

Mirror

Mirror, similar to Peloton, aims to bring the fitness classroom experience to the home through a ‘smart’ mirror. The product, which resembles a full size mirror, allows the user to see and follow a virtual instructor (yoga, cardio, strength, boxing, etc.) while enabling the user to watch their own movements in the reflection. Sporting a price tag of $1,495 and a monthly subscription of $39, Mirror is also targeting the affluent and time constrained professionals market.


Founded by Harvard graduate Brynn Putnam, Mirror has raised $40 million and is only valued at $300 million at this time. Although eclipsed by Peloton’s success, Peloton’s own popularity has helped Mirror gain traction as well.

ClassPass

Whereas Peloton and Mirror are helping people exercise at home, ClassPass is doing the opposite and getting people to attend the more traditional in-gym classes. The company provides a first come first serve marketplace that lets users find and book fitness classes, even if they don’t belong to the corresponding gym or studio. Payal Kadakia, the founder of ClassPass, started the service as a way to book dance classes, but pivoted towards fitness. The advantage of ClassPass is that, with subscriptions ranging from $45 to $135 a month, the user is able to choose from an array of fitness related classes (Spin, Yoga, Boxing, etc.) and attend them without any extra fees.


With a total funding of $255 million and a valuation of $610 million, ClassPass recently acquired a smaller competitor and is well positioned to be the next unicorn in the fitness tech space.

Peloton’s IPO

As the biggest startup out of the three by far, Peloton is now setting its sights on going public. To that end, the company recently filed confidential IPO paperwork with the SEC. Unlike most tech startups, Peloton has been able to quickly become cash flow positive, and could be better positioned than its money losing tech peers (Uber, Lyft) in its public offering. As with some tech IPOs in 2019, Peloton’s IPO could be one full of surprises.


Peloton IPO Date: TBD.
How to Invest in Peloton Stock: Exchange TBD.
Peloton IPO Price: TBD.

Check back for updates as more news about Peloton’s IPO approaches.

P.S. SoulCycle pulled plans to go public in Spring of 2018 due to "market conditions." That doesn't mean you can't tap it back. #SoulFam
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When Should You Not Exercise Your Options?

Stock OptionsExercise OptionsHarness Wealth

Michael Wenner   June 26, 2019

This guest post was written by our friends at Harness Wealth. See below for more info.

Stock options - the right, but not the obligation, to buy stock in a company at a fixed price - are ubiquitous in the startup world. Companies typically grant stock options as a form of compensation and as a way to make sure employees have skin in the game.



In many cases, stock options are valuable because they allow employees to acquire equity in a company at a lower price than a previous financing round. In hit cases like Google, Amazon, or Zoom, employees were able to acquire shares and see a big pay day. There are situations, though, where not exercising stock options may make sense for an individual. Primarily, as the name implies, stock options give employees optionality, and unless the options are expiring, it may be prudent to hold off on exercising to maximize value and reduce risk. Below are some situations that demonstrate the value of not exercising options.

1) When you can’t afford to exercise your options


Exercising stock options costs money, albeit at a price point potentially lower than a future equity raise or public offering price. If you can’t afford to buy the shares, it may be best to hold off. Borrowing money—in other words, leveraging your assets—can significantly increase the cost and the risks of exercising your options. In the event the value of your company’s shares decreases, you will still be contractually obligated to pay the loan interest and loan principal. If you’re unable to, you may be required to forfeit the shares to the loan holder or liquidate other assets to repay the loan.

Additionally, there are a number of tax implications regarding exercising options. For a deeper dive into the potential tax implications of exercising stock options, check out Tax Reform: What it Means for Your Startup Equity (Part I) and (Part II).

2) Limitations on selling shares post-exercise 


Companies have different policies regarding equity ownership for employees and non-employees. Oftentimes, employees have strict restrictions on the sale of their equity, either requiring them to hold the shares for a certain period before they’re eligible to sell or only allowing the sale of part of their equity.

Prior to exercising options, inquire about your company’s policies regarding the sale of equity. If you exercise your options and aren’t allowed to sell enough to at least cover the purchase price, commissions and fees, you’re taking on a risk. You’ll be stuck with the stock, which could decline, and your investment could lose substantial value.

3) The importance of portfolio diversification 


Portfolio diversification is an important strategy that aims to minimize risk and maximize returns by balancing the various risk profiles of various investments. Purchasing equity in a startup through stock options is one part of your investment portfolio, and, as a result, you should balance your portfolio accordingly.  You don’t want the success of your entire portfolio to depend upon your company doing well. If you exercise your options and don’t sell your stock immediately, you could end up with your whole portfolio riding on the stock price going up.  If things go poorly, this could mean you end up out of a job and your investments tank at the same time– which is hardly a good position to be in.

You can avoid this by selling at least some of the shares you exercise right away – but only if you’re allowed to do so and can afford to sell and make enough of a profit to pay any capital gains taxes and other taxes you’ll owe.

As such, your risk appetite and desired portfolio diversification may warrant holding off on exercising options granted by your startup.

4) Stock option and equity value is dependent on the success of the company 


It’s important to keep in mind that the value of stock options and equity are wholly dependent on the success of the startup. As noted above, in ultra success stories like Google and Amazon, employees were handsomely rewarded for buying into the company. In reality, not all startups are Cinderella stories. By exercising stock options, you are betting on the company having a successful exit, either through an IPO or acquisition, but in the case where the company folds, the equity value goes to zero along with your investment. As a result, it can be prudent to wait until the startup has proven itself and has a clear path to an exit.

This is also dependent on your ability to sell your stock shares after exercising. If you can’t, and you think the price of shares will fall, it would make no sense to exercise your options and pay a lot of money for an investment you believe will lose value.

5) Talk to a Financial or Tax Advisor


Consult with a financial and/or tax advisor to discuss the best course of action regarding your stock options. A financial advisor can help you understand the risks and benefits of exercising stock options in the context of your financial situation, risk profile, and long-term plans. Additionally, a tax advisor can help you understand the tax implications regarding your financial decisions.


This post was sponsored by Harness Wealth. Harness Wealth is dedicated to helping clients unlock financial opportunity to achieve their best financial future through a holistic and personalized approach. They provide a unified data platform that enables clients to manage their financial picture. Harness then pairs clients with a highly curated set of top tax, financial and legal advisers, and power those ongoing relationship with their proprietary technology.






Note: EquityZen is not tax or financial advisors or professionals. Please consult financial and tax professionals prior to making any investment decisions, including whether to exercise options.

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