VCs and accelerators take a portfolio approach and focus on high-risk high-return unicorns, while founders and employees are encouraged to give 100% to one company at a time.<p>This leads to founders and employees having all their eggs in one very high risk basket, typically until exit.<p>So, if you could, would you trade or swap your shares on a secondary market in order to get liquidity / diversify your “portfolio”?<p>Has anyone done this successfully or got any alternative strategies to mitigating / diversifying the risk?
I think what you are asking is whether there's another way to
recapitalize your business without selling 100%. The answer is a definite yes. Founders do it all the time. The difficulty, in the past, was for investors to be ok with the founders taking risk off the tables. However, that's more prevalent and acceptable now days for later-stage series to be a way to provide founders with liquidity.<p>Dean at CorkLabs (<a href="https://www.corklabs.com" rel="nofollow">https://www.corklabs.com</a>)
- We help early-stage companies develop business strategy that is acquisition and funding ready.
Funny you mention this, I was just reading [1]this article related to the quote on "putting your eggs in one basket". Conventional wisdom says "diversify". However, I'm of the belief that you'll need high risk for a high return (can't have your cake and eat it too).<p>[1] <a href="https://www.themoneyhans.com/how-to-get-really-rich-put-all-your-eggs-in-one-basket/" rel="nofollow">https://www.themoneyhans.com/how-to-get-really-rich-put-all-...</a>
Almost always, lol. Most people don't have the high stakes "all in" gambling it takes to run a startup from 0 to billions. Often founders can waver when they can just cash out for millions, but this is against the VCs optimum.<p>Sometimes VCs do realize this and encourage the founder to take a high salary past a certain stage or sell some shares. I think Softbank does this to some extent, among others.
Why is "swapping" shares better than selling for cash (and then investing that in something less risky), which you can already do through secondary markets like Sharespost...