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Summary:

[qi:115] Instead of holding out for an IPO or acquisition, these days, employees who have spent years at burgeoning startups are eager to sell their stock holdings in exchange for cash, an article in the Wall Street Journal pointed out today. Case in point: Current and […]

[qi:115] Instead of holding out for an IPO or acquisition, these days, employees who have spent years at burgeoning startups are eager to sell their stock holdings in exchange for cash, an article in the Wall Street Journal pointed out today. Case in point: Current and former Facebook employees were recently offered the chance to sell up to 25 percent of their vested shares — but the glut of employees looking to cash out was so high that not everyone who wanted to sell was able to.

Facebook employees aren’t the only ones eager for a payday; Stacey wrote last fall about other venture firms offering employees at their portfolio companies a chance to cash out. Perhaps the drought in IPO and M&A activity makes payday look even further out, or maybe employees that were once content to wait for their millions need money now because the economy has tanked. Readers, what do you think? Take our poll below the fold.

  1. This shouldn’t be a big surprise from several perspectives.

    First, some companies like Facebook are going way beyond the point where they could IPO or be bought for a handsome sum. Someone thinks they benefit from this, but how do the rank and file who did not necessarily sign up for an indefinite lack of liquidity and who may not want to make the same gamble benefit?

    Second, startup employees take less cash in the expectation the equity will make that up. If the opportunity of liquidity presents, why wouldn’t they at least try to make up some of that cash shortfall to pay their bills?

    Third, early employees get completely vested and companies often do not come through with meaningful additional grants. In essence, they’ve been paid for work already done. Why shouldn’t they be able to spend that money?

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    1. You know the saying “Don’t put all your eggs on one basket”? They are just being smart, taking 25% off the table is just having good business sense. If the company is making enough cash to offer a buy back it’s time to begin to limit the risk.

      Enjoy the reward of all the hard work and move on to the next phase …

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  2. I wanted to vote for all four. :)

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  3. In regards to FB, this may sound antithetical – but their buying employees vested shares…

    could be part of a leadup to an IPO…

    simply by consolidating internal stock before selling pubilc stock.

    It helps FB as a company in the longterm and employees in the short-term.

    Nice points smoothspan – I agree – -n today’s economy… taking the money isn’t a stupid option.

    When, not if, FB IPOs, they will probably offer employees options, but more restricted than the original vested shares, so that they can maximise the offering to the institutional investors and the general public.

    If anything, FB’s current move is smoke from kindling being buit for a firesale of shares in an IPO.

    I don’t believe they have waited too long to IPO.

    Overtaking MySpace would have been a goal to maximise IPO value, consolidation of their market via purchasing FriendFeed a lesser goal but one that no doubt increases their potential public share value, and their last goal before IPOing may be successfully enacting a strategy to adjust to Twitter as friend or foe.

    And let’s not forget a smaller goal, which may be dominating the iPh social networking scene via their new app.

    Once these goals have been achieved, Facebook is probably looking to IPO on top of the next robust upwave in the financial conditions of the Valley and Wall Street.

    Then they can milk all the new market optimism, maximise IPO value, and have a clear lead over competition.

    But this is just BS guessing of course!

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  4. Why NOT cash out some shares? Depending on your grant size and the company, you could be looking at truly life altering money. Would I cash, say, $50k out? Not unless I was buying a house or something. But if I was at FB and could cash out $500k or more? Why not? Especially for 20 somethings that’s money that means they never need to worry about retirement. A few hundred thousand won’t let you retired at 30, but it will mean that, if you invest decently, your future is pretty much set.

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  5. With the dearth of recent IPOs, unless you are independently wealthy, it would be prudent to take the cash. Many companies never reach the IPO phase, leaving vested stock essentially worthless.

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  6. In addition to all the points mentioned above, there is a new generation of employees different than the one that used to work for google in its early days. And I think that these people could be significantly less patient when it comes to the time between work and its rewards…

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  7. I cashed out options at what once was considered a “startup”. In retrospect it was the worst mistake I ever could have made. I should have just kept them until I vested (I left a month after vesting) and then sold them, because they would have had full value at a higher rate and the company would have definitely cashed them out at that time. Unfortunately I was a bit younger and not quite as savvy about such things.

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  8. duh…a $ today worth a heckuva lot more than a increasingly distant future $ or yuan (dare i say).

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