Hear from three shareholders who sold on EquityZen.
A few years (typically 3-4) after a startup starts, employees realize their options are worth a lot. People start getting antsy about realizing gains.
You give up salary for equity in this world. A buddy told me, ‘Nobody ever went broke taking profit.‘
Many times, employees don't even know they can sell [in a secondary market].
I started wanting to sell in 2014 to buy a second house. I actually referred my friends at the company to EquityZen – they had even bigger issues than I did (tax related). Most people are selling because of tax reasons or because they want to diversify.
I didn't have a lot of cash 5 years after leaving a well-paying hedge fund job, but had a lot of equity. I wanted to change my financial make-up.
I wasn't concerned about the value of the shares; I needed money to pay for house improvements and I just wanted to have some extra money around. The opportunity to sell was available so I took advantage of it.
I went with a bigger company first, but waited several months for a bid. Then, I was looking for anywhere I could sell. A friend referred me to a hedge fund. It sounded all legit, but they offered me all kinds of weird stuff (a lot of structuring, profit-sharing). At first, I was worried because I hadn’t heard of EquityZen before. But they moved fast; within a month, EquityZen had buyers lined up for me.
EquityZen does a really good job and the experience is seamless. The first time, there was a lot of legal documentation involved, but the process was still smooth. It was pretty risk-free as far as the transaction was concerned.
After I left the company, I had some vested options. I explored some possibilities to cash out some of the equity. I saw articles that mentioned EquityZen, emailed them, and started a dialogue; it was easier than I thought. My friends told me the process at other places was painful.
They were very helpful, and they even guided the process for their forms. For ex-employees, they don't have any issues. The company has been around for 7.5 years so they have several ex-employees out there. They're trying to avoid random stuff going on. To sell your equity to someone, you need to transfer the shares - you have to go to the company, who has them on their books. The company has to do all this paperwork. It's hard to fake it - there isn't a lot of room to do anything strange.
The company was okay with it. We went through all the paperwork, and there was no push back at all.
I was surprised that people don't know how to value their equity. You can't just look at what the stock is trading at, like with a public company. I probably will look to do additional transactions at the right price, but based on demand. I’m not itching to sell more, but at a good price, I would definitely consider it.
I’m still in touch with former colleagues; the general feeling seems to be that there isn't much demand right now for the shares. No one is freaking out, but they would like to have some liquidity.
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