The Vested Blog

The Odds Aren’t in Your Favor

But Vested can help.

A safe assumption is that your odds of becoming a millionaire by working for a private tech company are not good. The best chances for equity upside go to the earliest employees, especially if the company isn’t destined for unicorn status.

Here’s how we see it:

Many employees are better off going to work for a public tech company where the salaries are generous, the equity is liquid, existential risk is minimal, and work/life balance is predictable. But money isn’t everything: working for a startup can offer more excitement, greater responsibility, more avenues for creativity, and faster opportunities for career growth.

Employees need to evaluate their compensation potential with clear eyes. Current trends have made it harder to obtain value from startup equity; as Steve Blank eloquently explains, stock options aren’t a good deal for employees anymore.

When considering a startup job, employees should be prepared for three things:

1. Understand if your equity award is fair

The equity grant is where you can unlock the most value from a startup job. But equity is specific to each company, making it hard to determine how many stock options you deserve. Even if a company tells you the percent ownership your grant represents (most won’t), how can you determine if that’s the right amount for your role and the current stage of the company?

Vested’s equity fairness calculator is now broadly available. Find your company, enter a job title and option award – we’ll tell you if we think it’s fair based on our view of the industry. We posted about how that works and why it’s important yesterday.

2. Keep track of how your company is doing.

Your future value is directly tied to the value of your company. Don’t miss the forest for the trees, stay objective about how your company is growing and be prepared to make your own exit. Vested tracks the valuation, fundraising, and potential exit scenarios for a growing list of companies.

3. Look for opportunities to take money off the table.

Some outcomes you have no influence over: your company may go public, get acquired, or go out of business. Each scenario will dictate what happens to your stock options. But some scenarios are up to you:

  • Your company may offer you a chance to sell shares back to the company, or to new investors (structured secondary).

  • You may have the opportunity to sell pre-IPO on one of 20+ marketplaces or to one of the 12M+ accredited investors in the US (unstructured secondary).

  • There may be interest from investors to give you risk-free financing to exercise your options (they get a take of the eventual upside, but you owe nothing if your company goes under).

It can be a lot to keep track of, but Vested can help with each step. We’ve expanded both our fairness calculator, and our stock option finance/sell tool to a larger pool of companies.

If you’re interested in financing the exercise of stock options, or selling them, add your equity details on Vested and let us know. We’ll match you with opportunities as we find them. Of course, your data remains anonymous to our partners, until you request that we connect you.

Find your company now to get started.


Our equity fairness calculator

If you’re wondering what a fair salary is, there’s a whole world of information available. You can slice it up by geography, seniority, company, job title, and any number of things. Equality, fairness, and transparency have all been hot topics when thinking about salary.

What about stock options?

If you’re working for a private tech company, especially an early-stage startup, your equity grant could potentially become the most valuable part of your compensation. But how do you know if it’s fair? 50,000 shares might be a lot at one company, and almost nothing at another. Most companies won’t share the information you need to make an informed choice.

We’re happy to share that our Fairness Calculator is now widely available for private companies. Simply search for the company you’re interested in, enter your job title and options grant, and get a quick look into how it compares.

Try it now at vested.co

So how does it work?

Having conferred with equity compensation consultants, scoured publicly accessible databases, and received survey data from private company employees, we’ve assembled what we believe to be the most accurate and comprehensive equity award database for US employees at privately held technology companies. We intend to be the source of record for equity fairness, and to ensure employees can make the most informed decisions possible

We start with the option award, translating this into a percent of shares outstanding so we can compare your offer to others. We leverage our data to create a current projection of fully diluted shares at your company. With this percentage we can then compare it against median values based on comparables - similar job titles at similar companies who are at a similar stage.

Of course an equity award is only one component in a compensation package. Some companies prefer to give a higher salary, or rely on additional option grants to create compelling offers. Whatever the compensation mix, we hope our fairness calculator will help in your decision making.


Vested is now a Registered Investment Adviser

We’re proud to report that Vested is now officially a Registered Investment Adviser (RIA).

What does that mean? It formalizes our commitment to you, the employee. We started Vested because we felt that employees had lost their advocate. As an RIA, we must act as a fiduciary: you, our customer, always come first. We must unconditionally put your best interests ahead of ours.

It’s a critical distinction that aligns Vested entirely with the employee. Your company may claim to have your best interests at heart, and third party providers of pre-IPO liquidity or loans may present their offerings as unbiased, but neither are legally obligated to act in your best interest. We are. And we seek to impartially present you with all available options.

Our goal is to help you make informed equity decisions. As such, we ask for details about your equity compensation that you wouldn’t necessarily be inclined to freely share. Our team is experienced in building scalable, secure, financial applications within regulated institutions, and we follow stringent data privacy and security best practices. Our mission is to be your trusted adviser. We work for you.

What our Lawyers Reminded Us to Say: Registration as an RIA does not imply a certain level of skill or training – it’s an alignment of incentives, promise to disclose conflicts of interests, and agreement to follow data privacy and security best practices.


Plaid Acquisition

Yesterday, Visa announced their intent to acquire fintech company Plaid for $5.3 billion. While an exciting development in its own right (huge kudos to the Plaid team), at Vested we took a special interest in this story as the first major exit of a company that we profiled.

Vested provides a number of tools to candidates, employees, and shareholders of private companies looking to better understand the value of their equity. Our Exit Scenario models provide a range and likely scenarios for a private company getting acquired or having an IPO. Plaid employees utilizing Vested would have estimates for:

  1. Company valuation range at exit
  2. Price of a common share
  3. The value of their equity holdings
  4. Several probability weighted exit scenarios

These data points can be useful for anyone thinking about career moves, financial decisions, tax planning, and the like. So how did our model perform with Plaid? In short, excellent:

We anticipated an exit (acquisition or IPO) in the range of $5B to $7B for Plaid. Of our three most likely outcomes, we expected it to fall somewhere between $5B and $6B.

These are still early days for Vested. While we’re just starting to scale the number of companies we profile, we are excited and encouraged by these results; remember we don’t get any data from the company - we build solutions solely to empower the employee.

We hope the Plaid employees and candidates using Vested found this tool useful, and we look forward to helping more employees make the most of their valuable equity.

Tom & Matt
Vested Co-founders


2019 Retrospective

It’s been a busy few months at Vested - we’ve continued to grow our team (currently five strong) and add companies to the platform that employees have requested.

We’ve also worked with some of the major (and minor) players in the ecosystem who provide both loans to employees for exercising and buyers for pre-IPO shares. We’re incorporating some helpful user feedback and scaling our backend to cover even more companies. We have a lot to do, but do feel that we are starting to make an impact for employees.

Despite surveying different stakeholders (employees, founders, investors) before launching, we didn’t really know how Vested would be received. Since launch we’ve learned:

Employers either love us or hate us

We expected employees would appreciate a third party perspective, and we anticipated some companies wouldn’t love “an outsider” assessing their value, but we didn’t predict the more binary outcome we’ve observed in our small but growing sample size.

Some companies love us. These companies tend to be transparent with employees on all things equity, have market above market equity awards, and are focused on attracting and keeping top talent. Our third party objectivity validates their claims and helps answer questions that their HR/Finance/Legal teams can’t - they need to keep employees at “arm’s length” when it comes to providing exercise and financial advice. These companies want Vested as part of their recruiting and retention process.

Some companies hate us. We’ve heard directly from company founders and company general counsels - “take our companies off Vested”. Rationale has included - you’re sharing confidential private company data (we’re not), you can’t target employees at private companies (we can), and your data is wrong (we hope not). Of all the concerns, the third is the most concerning to us - we clearly want to have the most accurate valuation and share price numbers. And we work exceptionally hard to determine those numbers.

We start with a 409A valuation and waterfall analysis of the company. How do we get this? We build our own with the best in the business based on public data sets. As most folks know - 409A valuations, whether performed by a company or an outsider, all have questionable accuracy - or as Bill Gurley says “quite precise — remarkably inaccurate.” ( NY Times ).

We then reconcile last fundraising information, industry averages, and public filings to generate current and potential future value. Aside from that, if available, we fold in real time pricing demand from the market.

We may not always match exactly with the numbers that a company internally determines - but we’re close. Certainly close enough for a third party perspective that should help guide an employee / arm them with some data to have follow up conversations.

Fears of Transparency

Some founders (of both companies we cover as well as founders we surveyed) brought up another concern - that the transparency we’re providing prompts more questions / confusion internally and makes it harder to stay focused on building product / growing a company.

In the words of an American philosopher, Jocko Willink, “ Good ”. We applaud founders and companies that are transparent with employees, but if Vested is prompting more conversations with employees about their equity, frankly we think that’s a good thing. Companies rely on employees for their success and when the structure of equity compensation doesn’t change but underlying timelines for IPO/traditional liquidity do - there do need to be hard discussions between employers and employees. Decisions on equity can no longer be punted to a point where an employee might have a better read on company success or failure because employee tenure now rarely overlaps with IPO.

We don’t believe that every employee at every startup will become a millionaire. We also don’t want to facilitate short term trading of private company stock. We do believe that building a successful company is a team sport - and all members should have a basic understanding, and support, in determining how to make informed decisions when it comes to such an important topic. Aligned incentives and informed positions are hallmarks of engagement and required for ensuring employees have a long term, vested stake in the successful outcome of a company.

Equity is perhaps the highest potential value benefit for employees yet professional support is minimal

When if comes down to it, we’re not providing any more information than some employees already have access to because they know what to ask and where to look - both internally and externally. We’re democratizing who has access to shares outstanding, common stock value today/tomorrow, and where to look if they want to take out a loan or, if permitted, sell shares pre-IPO. We make good faith estimates, layer in our recommendation, and facilitate connections in a previously opaque ecosystem.

So while we’re glad some founders do take transparency seriously - we think most companies could do a bit better. There isn’t a “one size fits all” approach to how to structure equity programs. But we do know the current “standard” implementation is broken - and it needs to be fixed. Otherwise, employees will continue to suffer, companies will lose a powerful retention benefit, and the entire ecosystem suffers - talent will move to where there is transparency.

(Read Sam’s whole post, here)

Companies/founders/CEOs will always be in the best position to speak to internal company metrics. We don’t want to get in the way of that. It’s just that employee equity isn’t just an internal issue. The underlying historical structure of equity compensation is fading in relevance (anytime close to 80% of people aren’t doing something you need to question effectiveness), external market forces impact value, and fundamentally, internal company personnel can’t make financial recommendations to employees and employees are looking for advice.

In closing, we’ve had a great year - building, learning, and adapting. We couldn’t be more grateful for the feedback we’ve received and look forward to growing the team even more and scaling our approach to assist even more employees in 2020. As always, if interested - drop us a line - we’d love to hear from you!


Employees Deserve Better

Today we’re excited to announce Vested completed a $1.2M round of financing to grow our team and bring our first product to market.

Working for a private company can be amazing. Having the opportunity to contribute to a tightly-knit team, help build a new product or service, and the ability to professionally grow are all powerful benefits.

Financial returns are also a powerful motivator. Often the cash position of an early stage, private company dictates more modest salaries. The hope is, employees will receive meaningful equity awards that, in time and with company successes, will bear the fruits of the employees’ labor and be worth far more than the cash differential between a private and public company salary.

That’s the dream. There’s a problem though - and it’s not the success/failure ratio of startups (we can’t help that) – it’s that equity isn’t simple; it’s really hard to understand it’s value, how to manage it, and (hopefully) how to monetize it. But no one really talks about this. Sure - there are plenty of blog posts and tax calculators out there – but we don’t think that’s solving the problem (and it doesn’t seem to be putting a dent in the 76% of employees who never exercise options).

Employees need something more, and deserve something better.

1. Employees need to be able to compare opportunities.

Once a person finds a compelling private company to join, often times the full monetary value of the compensation package is hard to discern. Early stage, private companies are notoriously hard to value. While the employee is passionate about the product and the role, passion doesn’t fund a 401K or 529 plan. How does one compare offers or baseline a negotiation? Often companies further complicate the problem by not revealing the total shares outstanding. That’ll change.

2. Employees need ongoing advice.

Once hired, equity awards tend to be forgotten; employees frequently defer consideration of equity until IPO or M&A time. The truth is, equity awards need to be managed actively, and a monthly email saying you’ve vested shares doesn’t qualify. Companies may point employees to generic “tax advisors” who advise on “what’s best for you”. Beyond advice to “exercise early and often”, outside advisors cost money and have access to less information than the employee. That doesn’t make for great advice. Employees deserve tailored advice, without unnecessarily financial and legal complexity. Need capital to help finance an option exercise? Let us help with that. Companies are staying private longer than ever (50 unicorns are older than 10 years…), and guess what? Capital wants in - investors want exposure.

3. Employees want to monetize.

Ideally your company is acquired or IPOs at a great valuation during your employment. However, the average tenure at a startup is right around two years, while time to M&A is averaging 6 years and time to IPO at 12 years. Odds are against seeing that event during employment. An employee who has exercised responsibly is still able to capitalize on their equity though; close to 50% of companies will allow secondary stock sales pre-IPO, and a majority of those companies will allow a sale through a company structured program. The bad news is up to 78% of these sales are left to the employee to structure; most don’t know where to start. Let Vested guide you - don’t let market professionals low ball your value.

If it sounds like we’re focused on the employee, you’re right. But guess what? This helps the company too. It’s not rocket science - do good by your employees, build a stronger company.

We’ve led teams and helped build companies. We’ve had these conversations countless times. We wish equity was more simple, but it’s not, so we’re going to help fix this problem in a scalable, accessible, and friendly way. Then we’ll move on to public company equity.