3 Things Founders Need To Know About Liquidity


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3 Things Founders Need to Know About Liquidity

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Is creating a successful startup now easier or harder than before? In many ways, launching a startup is much easier today than it used to be; the ecosystem is full of services, access to information is instant, the startup world is now a global industry with so many templates and millions of practical tips available, and the growth of venture capital, incubators and accelerators is more than needed. more accessible than ever.


Today, however, founders face new challenges. The competition is global, the pace of innovation is constant and ever-accelerating, expectations are higher, and the path to an IPO is longer. This last point may be the most interesting; staying private longer changes the entire entrepreneurial journey and calculations. The path to liquidity through an IPO or acquisition has changed, and leaders must adjust.

Related: 4 ways an entrepreneur can increase liquidity

How did we get here?

Today there are about 1200 unicorn companies globally. Never before have there been so many unicorns or private companies worth more than US$1 billion. The two main reasons a founder takes their company public are access to capital and providing liquidity to shareholders. Today, however, the abundance of available venture capital allows founders to keep raising the valuation and postponing the liquidity event. In addition, there are now other ways shareholders can achieve liquidity without necessarily resorting to an IPO or takeover.


Maintaining confidentiality delays the costly management and regulatory challenges associated with public trading. Given all the due diligence and costly compliance and reporting overheads required to run a public company, as a founder, you would probably choose to grow outside of the public market. How does maintaining privacy affect founders, investors, employees, and their company? And how does it change the way you work?

Founder’s Guide

Ten years ago, today’s unicorns would already be in the public domain. Founders, venture capitalists, and employees could turn their initial investment and hard work into wealth, but this is not happening in this market like it was in the past. Today, there are more liquidity options for all shareholders of companies without a mandatory IPO or acquisition. With more opportunities for liquidity and a new entrepreneurial path, founders should consider the following as they grow their companies.

For starters, if you are starting your own company for the first time, find a board member or advisor who is well versed in the various equity incentive plans, their structure, tax implications, etc. Find members with a broad outlook combined with deep experience in your market and look for people who are experienced investors.

On the subject: How mentors can give feedback to founders without discouraging them


The second thing to understand is that balanced employee compensation is a key tool in your growth plan. How much will employees receive in wages compared to what they will receive in equity compensation? For most startups, the biggest expense is salaries. We all need the best talent, but sometimes we can’t afford it; This is where justice comes in. Fairness gives employees the opportunity to play skin. They are co-owners, and if the company succeeds, they will directly benefit from it. You get better performance from employees when they also feel responsible. However, it is important to adjust the compensation plan as the company grows. Here are a few things to consider:

  • Company stage: This is directly related to the risk that the employee takes on by doing this job. Both investors and employees who are willing to take on more risk deserve higher rewards.

  • Job function and level: Higher level employees may expect higher wage compensation, while lower level employees may be more willing to accept lower industry wages in exchange for greater equity compensation. This is mainly about the stage of life they are in; because younger employees often have fewer responsibilities, they are more likely to take lower wages. People with families usually cannot refuse such an amount as wage compensation.

  • Market trends: What are your competitors doing? If you offer something less interesting than your competitors, they may attract the best talent.

  • Stimulation of the best talents: As a company grows and accepts new funding rounds, but you want to maintain execution speed and optimize your cash flow, issuing new stock options is a great way to keep top talent.

Maintaining a high level of team spirit is key in declining markets.

The strong growth that we have seen in the private markets over the past ten years has directly affected how and why the secondary private equity market has grown. Since 2012, the aftermarket has grown more than five times its previous size, hitting a record $130 billion in 2021. During this time, online platforms that allow shareholders to buy and sell shares of private companies have emerged and demonstrated great success.

We have faced downturns and market volatility and have seen downward pressure on valuations in this market. Leaders running a winning company must take a long-term view, knowing that valuations are cyclical. It’s important to stick to the basics and reassure shareholders that you can see the way through the vicissitudes of the market.

Related: 3 Simple Strategies to Boost Morale and Get the Best Out of Your Team


It is important to note that leaders should care about the people who built the company with them, and this brings us to the third tip. When employees have devoted years to the cause, dreaming of material prosperity, liquidity-holding events threaten the very morale that executives need to keep the company strong. As a founder or manager, you should seriously consider selling stock on the secondary market without adding too much overhead to the cap table.

Working for long periods of time with nothing but paper wealth while industry, competition, and technological innovation never slows down can be risky. Giving employees the opportunity to turn their paper wealth into some tangible wealth can be a moral boost that will save the day.


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