> with or without the startup's consent<p>I'm not convinced this is possible in the long run.<p>The idea seems to be that employees can't sell the shares themselves, but can sell the kind of derivative around which Equidate is based. That may be true at the moment, in that the employees may not be contractually forbidden from writing such a derivative. But if companies currently forbid sales of the shares themselves, won't they eventually get wise and start to forbid sales of derivatives as well?
I can see two practical problems with this, and am curious about how they deal with them:<p>- The investors will not be entitled to the same information as stockholders, which will limit their ability to properly value the shares. This, in turn, should increase their risk perception and lower the price they offer.<p>- Even if the contract between the investor and the employee is sound, the employee could fail to deliver the stock for a number of reasons, including violating something in their employment agreement, or due to onerous provisions among the vesting terms. (Companies have been known to pull back securities which were <i>already vested</i> at the time the employee left.)
Walk me through the mathematics of why an Employee at a startup they believe in and have vested equity in would sell that pre-IPO to an investor?<p>Can you provide a few scenarios? I imagine other HN readers are curious too, especially given our(collective) lack of experience with IPO's....well at least mine.
Something very common in the poker tournament world is equity swapping. In any given tournament a player might swap 5-10% of their action with one or more other players. This is a way to reduce variance while maintaining similar equity (assuming roughly equal skill levels).<p>Why isn't there a service for allowing employees at different startups to swap their equity to reduce their variance?
One of the biggest reasons people sell private stock on the secondary market is because the want (or need, in the case they leave) to exercise options and pay the associated taxes. Early Twitter, Facebook etc... employees who left had the standard 90 days to exercise options. The good news is that an option exercise might only be $30k, the better news is the stock was worth $15 million the bad news is the tax bill was $6+ million - probably more than Mom or Uncle Willy could lend! Hence a stock sale. The other big reason people sell is life happens, i.e. after 5+ years earning $150k in the Bay Area doesn't buy a new house after you get married and have kids. I've done hundreds of deals and the reasons for selling are very consistent. But there are definitely issues with the proposed structure of Equidate. Happy to discuss with anyone larry@ebexchange.com
<i>It’s similar to a collateralized loan. No shares are trading hands.</i><p>It actually sounds kind of like a convertible bond that you might have in an early stage VC round, except that instead of the company issuing shares when the conversion happens, it's the founder/employee "converting" from their already issued shares. The convertible bonds can trade just like well, like other bonds trade.<p>Given that they haven't even managed to acquire "equidate.com" (currently goes to an all comic sans site for "Equine Event Dates & Places") we have to assume this is a pretty early stage / MVP type of company.<p>Ultimately this comments thread could really use some input from a knowledgable VC or lawyer...
<p><pre><code> Regarding the SEC's 500
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