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Old 18th January 2010, 07:33 PM   #1
Robert
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Default Startup Equity For Employees

This is a really good article about issuing stock to employees:

Startup Equity For Employees

It's written for the benefit of employees but is a great resource to give business owners a review of what is involved.

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Old 19th January 2010, 05:45 PM   #2
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Did not read the article - but there is starting to emerge a secondary market for these types of shares. One of the hardest things for employees with stock or stock options is liquidating those securities if and when they need cash and their employer is not yet an public company.

Now, with this secondary market - some employees may be able to liquidate before the company's IPO.

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Old 19th January 2010, 05:48 PM   #3
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How would an employee tap into this secondary market? Are there sites set up for this kind of thing? Very interesting.

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Old 19th January 2010, 06:05 PM   #4
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There are a few sites and I think by years end will be more. But, employees may not be able to directly tap this new market yet - yet. But, if their employer agrees - the employer has to put out financial results - the employer could do it on the employees behalf. Right now, since this is such a young industry - the investors in these shares want high volume.

But, it is making a market (meaning providing liquidity for these shares).

Facebook made news last year for doing this - selling some employee shares - you can google that - try facebook and secondary market - also try http://www.secondmarket.com/

The NASDAQ also create a secondary market but I think you have to trade $100MM or more.

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Old 19th January 2010, 07:05 PM   #5
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Excellent information, thank you!

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Old 19th January 2010, 07:44 PM   #6
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Just to follow up a bit on my comments - I just read a blog post that may confirm this a bit:

http://www.avc.com/a_vc/2010/01/the-...ma-and-vc.html

More specifically: "The innovator in this trend is a russian investment firm called DST, which did a $200mm financing for Facebook last May. That financing was a combination of primary (money went into the company) and secondary (money went to buy shares from employees and existing shareholders). Since then DST has also done a similar transaction in our portfolio company Zynga."

See where Fred Wilson mentions the secondary market of buying shares of employees and shareholders - facebook is not a public company - but employees are still able to liquidate shares in these secondary markets.

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