Re:Startups Rejecting Venture Capital
by dunpeal on Friday January 11, 2019 @02:00PM
(#18885906)
Zenefits is an example of a surefire unicorn that made too many mistakes and lost most of its value very quickly.
The key points are:
1. Startup valuations are highly volatile. There were plenty of startups that were valued above the billion dollar levels, then sold for 8 or even 7 figures.
2. While profitable established companies can also go south, such companies pay you in cash and liquid RSUs, so if they spiral down you just switch to a better performing company. Getting most of your pay in illiquid options means you risk losing multiple years of earnings in the best part of your career.
Specifically, tons of talented people took a job in Zenefits based on the assumption that their illiquid shares will be worth six-seven figures, and likely will never see anything close to that in real money. Same thing wouldn't happen for those paid in liquid assets.
The key points are:
1. Startup valuations are highly volatile. There were plenty of startups that were valued above the billion dollar levels, then sold for 8 or even 7 figures.
2. While profitable established companies can also go south, such companies pay you in cash and liquid RSUs, so if they spiral down you just switch to a better performing company. Getting most of your pay in illiquid options means you risk losing multiple years of earnings in the best part of your career.
Specifically, tons of talented people took a job in Zenefits based on the assumption that their illiquid shares will be worth six-seven figures, and likely will never see anything close to that in real money. Same thing wouldn't happen for those paid in liquid assets.