When Should Founders Provide Early Liquidity to Retain Staff?

All right everybody we have one more Session for you this afternoon of course Don't forget we are doing Q a there are Microphones by now you should know the Drill but in case you don't and for our Last session of this fine day we're Going to talk about my favorite thing Which is liquidity now everyone wants More IPOs we all want more Mega deals But they are a little bit thin on the Ground in the last couple of quarters so If you want to retain Founders and staff That have been partially paid in stock And there's no real return on the Horizon well how do you manage that so We have a whole panel to break down that Key concept so please welcome to the Stage your moderator it's Becca scootak We also have Amir from switchboard Maria From Beacon capital and Tyson from Notice thank you welcome to the stage Thank you [Applause] All right Okay one of the benefits of working at a Startup has always been the potential Upside a employee can get from stock Options when the company eventually Exits but in today's market guys what's An exit exits are few and far between And of course that's not the only way You can get employees confined liquidity And sort of maybe companies can use Employees sort of keep the momentum

Going now that an exit maybe looks Further away or a way to just keep People engaged and sort of building Because startup is such a long journey But Tyson is it really that easy Uh it can be I think that um you know if It was 2021 I would say pretty easy Pretty easy Um I think that uh you know in this Market the bar is certainly higher when You're when you're looking for secondary Liquidity Um I think that uh you know buyers are More picky I think there's also Challenges with cap tables nowadays Um the big investment rounds have kind Of made it difficult for common to be Valued at a level that would be Acceptable to most employees and so There's some complexity there but I Think it's definitely possible Um yeah my answer would be yes it's Absolutely possible In a mirror I wanted to ask you Ask you you're just I disagree with Tyson oh we'll start there let's start There I think it's actually really Difficult like um I don't know how many Of in the audience sold shares in a Secondary Market I bet it's less than Five percent of the people we have here Uh Like I wish we had a second in markets Like NASDAQ where there is enough demand

And there is bidding and pricing is Obvious the reality is so far from this That it's even odd to describe so I Think secret Tyson is although he's an Expert in the field but I think it's Four employees it's actually really Difficult to realize the value of they That they worked so hard for this is Something that as an industry we have to Fix Mm-hmm and following up on that I was Going to ask you since switchboard is Not your first company you've sort of Been through this process before Companies in the past how has employee Liquidity and sort of how companies Think about these stock options changed Yeah so switchboard is by six company And every time We start and you think you're in a Market and you compete with certain Number of companies you actually compete With all public companies and you Compete with them for talent and all Public companies have the advantage of Public currency so If there was an easy way to make it Available for employees I think that Would have been Great for all founders of early stage Startup so this is my I'm in switchboard We're doing a collaboration platform for People that want fewer meetings and Um

It is still difficult to provide the Liquidity that we want to employees Before that one company one public three That were acquired I remember I can Probably list on two ends the number of Instances that we add where we manage to Give liquidity to employees before the Public IPO And can you talk a little bit about what Your strategy and approach looks like Currently your current company Yeah so uh the truth is that there is so Much we as Founders as CEOs our main Obligation is to build successful Companies And there is so much that we can do to Help and facilitate the process like we Can be transparent we can be supporting It but their market and regulation Obstacles friction that is making it uh Very difficult so when I saw the need I Also invested in a company called Equity B that is providing some kind of Solution for this and their solution is Not actually to buy the shares but to do Forward contract that is giving the Employee most of the future value Without the risk And I think this is one approach That can work for employees and for Companies to provide early liquidity And this obviously is a topic that sort Of you would get a different answer if We were talking about an early stage

Startup we're talking about a late stage Startup as well as talking about the Employees versus the actual founder Themselves and Maria I'm curious because You come from the European market well How is it different over there when you Guys talk about companies and uh Founders offering liquidity Well how many Europeans do we have here Oh good luck guys All right so let's tell the Americans How it works over there in Europe it Doesn't Um Founder liquidity is something that Happens After the the series CEO would say Comfortably and serious B is debatable And serious a is always is almost always A no and there are two reasons one is Cultural when the Angels go in typically And I've been an angel before I was a Bit before I became a VCS or as an angel The minds and bees no I will first get Money out before the founder gets any Money out of the company so it's a Cultural thing but also as a systemic a Structural issue because most of the Funds are having have capital from the European investment fund from the British business bag and they do not Like secondaries they do not actually Allow the funds to invest in secretaries To give found their liquidity so we have

A systemic as well as a sort of a Cultural issue it's starting to change Now and here is why it's changing Because Um as there were more unicorns there is There is more confidence in the Ecosystem system liquidity starts Flowing earlier in the system but still It's trickling down And the the problem The serious challenge that you have in Europe because of the lack of liquidity Is that Founders are more prone to Accept the sub-optimal exit that's why You see quite a few exits as sub billion You will have 300 million 400 million Exits and that's because the liquidity It will take a lot more time and at some Point the founders say right I'm cutting Out I need to raise a family Yeah and sort of looking at how Companies can think about this from the Beginning you're just starting to hire Employees you're just starting to put Some of these more set standards into Place as you're looking to build the Company how should Founders think about Employee liquidity maybe their own Liquidity down the line when they're Just starting to build how can they set Up these programs So uh this is totally confidential right No one no one's taking notes right yeah Nobody's taking notes

Um so first of all as Founders there are Ways to take care and make sure that you Will be the secondary option is going to Be available to you in later stages they Are I'm not a legal expert not a Tax Advisor but there are always when you Form the company to make sure that some Of your common shares will be Transferable to Preferred class I'm sure You know more about this than I do but You can make sure that Um Your common share can Convert to a preferred share after a Purchase the other thing that is really Important is choosing your partners Choosing the VCS that you work with what Is their approach Maria talked about Cultural resistance from The Venture Capital side to liquidity of Founders Like how strong it is with your founders With your partners I think this is for At least historically that was one of The main obstacles and it's really kind Of stupid because basically it puts the Founders and the VCS in a completely Competing misaligned Interests as a Founder if you start a Company you reach 100 million value you Still own 20 of it wow that's amazing It's a life-changing you want to get out For the VCS this is meaningless it Doesn't matter if they sell the 100 Million dollar company so I think the

More species can Do to help Founders be on their side And go for the Big Exit and the big or Even building a big company the better It is the founder the most important Thing is find the partners that will Work with you on this Tyson Maria what do you guys think Um It's very interesting um what you're Saying that how can they preemptively Start thinking programmatically about The liquidity and one thing we we've Seen and it's very encouraging is they Start building found they start building In the ssas of the city say around the Ability to sell up to 10 of their stock Between five and ten percent of their Stock without perhaps the the sort of The the approval of the entire Shareholder base but just the approval Of the board what you're doing this way Is a sort of preempting the conversation That hey I want to be able to do that now let's Not go to the other the other side of You know all the way to being able to Sell 20 30 of the business at series B That won't work what you want to do with Founder liquidity or liquidity for this Level the the employees is to use it Catalytically for Value creation within The startup in other words sell a little At the appropriate time so that they get

Encouraged to build even more value for The business and the shareholders if we Start thinking like that then we will Start thinking win-win about both the Opportunity and the challenge that we Have with lack of liquidity in the Ecosystem Yeah that's a really good answer yeah I Think I think that uh it's oftentimes Called serious FF shares in the US you Know for the founders to take 10 of Their stake that can you know be sold And things like that I think that's a Good signal to Future investors that hey This is Our intention and I think you Know I think founder liquidity is is Oftentimes uh a bit easier to come by Because at least in 2021 it was kind of A deal term a lot of funds would say Hey You know we're you should really take Money off the table that's why you Should let us invest Um and it was pretty heady times Um in that in that that period um I Think that I think that series FF is a Good way to do it obviously you got to Build a valuable company and you need to Have kind of excess demand beyond what The company needs so if you're trying to Raise 10 million dollars and you have 10 Million dollars of investment you're not Doing a secondary because no investor is Going to say oh you want to take with The companies and just take it for

Yourself that's that's weird and so um I Think that's that's the key is you kind Of have to have an excess of demand what I think is interesting is what some Companies are doing they get much larger Is programmatic liquidity so thinking About this from the perspective of hey We're going to do quarterly sales and an Organized way for our employees and I Think that's that's something that Requires you to kind of at that stage You know these are champagne problems You're doing very well if you have Demand that would come back quarterly to Buy more common stock from your from Your um from your employees but that's Something that I've seen some of the Best companies doing and the opposite of That would be companies that completely Block transactions which Um which is which is pretty pretty Pretty busted in my view I think that a Couple things I was a private placement Broker so I was I was helping employees And shareholders sell stock for for Several years Um before doing what I'm doing now at Notice and uh you know I hear things that companies will say oh We're blocking transactions to protect The validity of our cap table and we Want to know who our investors and all This stuff well the reality is you block Transactions and then forward contracts

Happen now you have no idea who the Beneficial owner is or spvs happen and SP interest trade and all this stuff Like when there's demand for your Equity You know these what used to be very Exotic have now become very mainstream Instruments that a lot of funds have Included in their mandates and so you're Never really going to stop it uh and There's there's downsides right I mean In the in the kind of the peak in 2021 Our notice does real-time pricing for Mid-delay stage companies and you know The valuation of stripe was 211 billion Dollars in the secondary market and they Were blocking transactions and then now It's 50 billion which is oh boohoo it's Still 50 billion but that's down 75 Percent so you know you have instacart Went out today at roughly a 10 billion Evaluation and they were worth 40 in the Peak and they're blocking transactions And so I just think it you kind of have To think about I think you kind of have To think about liquidity for yourself as A Founder that's great but also the Culture you're trying to build and like Thinking about it more for your team as As something that can that can um you Know be an HR benefit almost uh over Time and and the reality is some people Say oh well if they get liquidity They'll just leave and it's like well What kind of culture do you have like

Someone gets a couple hundred grand they Just leave okay maybe they should leave Um and I so I think it's more of a Holistic conversation Beyond just your Own personal liquidity as a Founder I Want to give a practical advice to Founders I assume there are many Founders here in the room Um Founders that think oh I'm gonna sell When I need find it that it's almost Impossible to sell when they need or When they want you can sell when you Solve a problem for someone by selling So for example my first company was Shopping.com we you're going to make fun Of me but it was in 97 the evaluation Was three million dollars we wanted Three million dollars the VC came and Wanted 2.5 million dollars there was a Gap funny right yeah Uh today's like the pre-precede it's Like uh and Um My co-founder basically came with this Great idea okay we'll agree to this Evaluation or you'll agree to our Valuation we're going to give you the Ability to buy some of our shares just a Little bit of our shares we're basically Going to give you the option for UNF and After year and a half they exercised This we made a little bit of money and That was nice That was a way to solve a problem yep

And provide future liquidity by the way The VCS immediately said oh but it's Going to be like an exit for you and my Smart co-founder immediately told him no That will be an exit for my wife I will Be here and I'll keep on working And I want to Circle back to something You said Tyson about how like companies Blocking their employees from being able To share to sell share options what does That signal to their employees and sort Of why should companies maybe try to Avoid that mindset especially if they're Looking to do hiring in this sort of Software yeah like I think I think it's Um you know I I haven't worked at a real Company ever so it's hard for me to know But I've heard other people say when They go in for interviews they show them A sheet you know they say oh this is What your Equity could be worth you know Like our last round was this the 490 is This and here's some numbers and look at That big number isn't that great this is Why you want this low salary right and Like that's kind of what gets presented But they feel they tell you like oh You're never going to be able to sell it Like you can't can't sell it Um that's that's less known to to Employees even folks that have been Working in companies for years Um and so I think you know I just think that like

Creating some kind of a program around It right like finding an investor that Wants to come alongside you that's going To periodically want to continue to size Up and be kind of either roafering Transactions so exercising you write a First refusal and directing transactions To a preferred investor to keep your cap Table clean or just having this program Again this is a champagne problem you Can't do this a series a you have to do This when you've when you've created a Tremendous amount of value for your Business but but it is a way to it is a Way to retain stuff because then when You're when you're interviewing new People you can say hey here's your Equity and not only that but every Quarter you can sell this much and this Is the history of what we've been doing And here's where it's at and it's also a Great price Discovery in a lot of cases You can kind of figure out what the Market's telling you Um and you don't have to I you know Instacart did like some 49a markdowns Where they mark down their internal Valuation a couple times during after The pandemic and you know we were Tracking things in real time in the Secondary markets and we knew it was way Lower and they lowered the 49a and then Like two months later to lower it again And that's just that's that's not a good

Look you know I think it's it's good to Be out there in the market and really Know what's happening so that you can um Be more precise about things so I would Say don't be afraid of the secondary Market if you're a Founder don't be Afraid of it it's the truth you need to Know what's happening don't and don't Let the lawyers tell you you can't do it And just tell them to figure it out like That's that's the key Is that fair tell them to figure it out Yeah other people do it why can't we do It just figure it out I think that the The The elephant in the room is that We're talking about this world where People can say and so on but the truth Is that 55 historically 55 of the Options are not even exercised and You'll be surprised in bad times or not Surprised but in the last year it was 72 Percent so Many people that have significant Contribution to building Extremely successful business basically Finished this journey without what they Deserve and I think that that is what Needs to be fixed and this is the Motivation to be fixed and I don't know if you like Equity be in Forward contracts is the way to solve it I don't know if there is another way Maybe Brokers is what you need to work

With but as an industry it seems to me Like really Wrong that people are not getting the Fair value for their contribution And sort of building off of that how Transparent or how should companies and Founders sort of set expectations for Their employees because I know we all Know this story you come in you take a Lower salary you have these big Potential upside from these employee Stock options but then what if the Company sells in two years at 250 Million you saw the pricing laid out for A huge exit an IPO and that's just not The reality and how can Founders when They're setting these things up how can Companies kind of set the right Expectations with these employee stock Options while still making them a Benefit at the end of the day For me for them for me I don't know Um so I think the only thing that we can Do is be completely transparent so Sometimes I interview people and told me About other offers they're getting and The company is refusing to say what was The last share price they're refusing to Say how many options how many shares There Overall and it's kind of stupid so I Asked like how are we going to evaluate This package if you don't have this Basic information so

I think that Again the the the best Approach is to be completely transparent But also to be careful not to set Expectations Um and no indication of what the future Of value is going to be because honesty Is Founders we have no idea Uh it can be anywhere from Zero to The moon so like Um Give people all the information that They need to put their assumptions make Their calculations come with their value Future value number What we've seen but that again is the European perspective which perhaps is a More sort of Less on that aspect is less Mature Market but what we've seen is That the more Courageous CEOs Will gather the interest from their Employees especially from their valid Employees who is likely to want to sell And why what are the reasons what are The reasons behind it and in the first Available of opportunity they will Create a sort of the the opportunity for For for liquidity so we had Founders in Our portfolio who when one of their Employees wanted to sell they pick up The phone to the existing investors to Investors that they wanted to come in in

The last round I said would you be Interested this is the opportunity here This is what um this is what would like To happen so proactively they went out Of their way to help the the c-level Executives to to get some liquidity out Of their their vested options Yes it takes some leg work but it shows Courage it shows commitment it shows a Sort of a conviction in in your ability To use your stock to keep your motor Your more your most valuable employees Instead of Switching gears events we've Talked a lot about employee liquidity But looking at founder liquidity too Maria I know your fund Beacon cap does Some fun things around founder liquidity So when you guys are working with Potential companies what are you guys Looking for when founders approach you About potentially taking some liquidity Off the table Um there are a couple of things in terms Of the the liquidity itself the Parameters first of all we as a fund Like to invest in a particular sort of A particular stage is when the business Will have reached 5 million ARR Typically we call that series B at least In Europe again nomaculator can differ From Um depending where you are in the cycle So where you are in the AR and how much Are you growing are you a valuable

Um sort of business in our eyes are you Likely to go for a sort of a super-sized Exit and and then we're looking at the Founder and there are a couple of things There the founder and the founding team Needs to have served time so to speak You cannot have a Founder who started Yesterday and a year later to be seeking Liquidity you want to have seen a sort Of five six years into the business to Have sweated you have really worked for The business and you want to see a sort Of a relatively modest liquidity at the Level where we are coming in again this Is Europe and this is serious B so you Don't want the founder to start taking 10 million off the table you want the Founder to ask for one two three million Why because this is how much this is the Cost of living essentially getting a Property in London this is the cost of Putting the kids through the schools Just to feel comfortable enough get Their wives get their mothers off their Bikes imagine Founders who have been Through University have racked up costs And then they started their own uh their Own startup imagine what they feel when They compare with their peers who went To Investment Banking and they make two Three four times this money so what we Want is to remove any doubt that what They're doing is the right thing and That they should want to continue doing

That for another seven years to get a Big exit for everyone so that's why I Say that we want to give liquidity when It is of strategic reason and it solves A problem in our case It solves the problem of Accepting a sub-optimal exit Are there any red flags you guys look Out for from Founders can Founders try Too early can they ask for too much have You seen weird structures how can Founders approach this without making Themselves come off as a red flag I'm going to find out after this panel Will never come to talk to her I I would say The business needs to be back to your Point Tyson needs to be well funded so As a Founder you cannot be asking for Liquidity when the business is starving Of capital and uh and is is having a Sort of a Runway challenge it is not the Right time to open up this conversation And probably you will get to know from Your existing universities who will Block it so the business needs to be in A stable footings it needs to be growing Aggressively and you need to you have Shown that you are able to secure the Capital required to fuel this growth And the ask needs to be Proportionate to where the business is How much time you spend investing in This business and that's why I'm saying

Well we're talking about a couple of Million at series B rather than tens of Millions that's what be the biggest red Flag Um also Um when in our case when we're giving Founder liquidity we do due diligence so We want to fill with the founder that we Are entering into a partnership Essentially we want to feel that um We are becoming part of his or heres Inner circle that will open up the books Will allow us to appraise the Opportunity and Um we will enter into a long-term Partnership we'll be there for him or For her until the exit and this is a Trusting relationship that is built not Overnight it takes it takes some time in The same way that it will take time to Raise around it takes time to secure Founder liquidity And I know May not be super surprising for some of Us in the room but that strategy is Pretty unique a lot of VCS especially in The earlier stages early even being Serious B series C aren't a huge fan of Founder liquidity and I'm curious sort Of how you mentioned this bit backstage How you guys can do this and sort of Offer founder liquidity without stepping On the other VC's Toes or sort of making The other investors not want to work

With you and I know America already I'll Be asking you about the same thing Okay how many VCS do we have in the room So I know how many people are piss off No it works great all right okay when Would you found the liquidity especially When we will do it what we call off Cycle not as part of a funding round we Have three stakeholders the founder The shareholder base And the board which typically will be Managed or controlled in a way because Of the investor director rights by the The most powerful investor in the last Round so you're trying to create a Scenario that it is win-win for everyone Once you have the sponsorship from the Founder you could play the founder Against the VC good luck that's a losing Strategy because all you're you're doing Is you're dividing the the very Broad And the Very the very sort of Relationship you want to work well in The future so what you you do what do we Do is get sponsorship from the founder To float the idea to present the idea to Outboard level and you want the yes from The investor director from the lead Investor in the in the last round now if The investor Um sees that the founder is asking for Too much liquidity He will try to block it he or she will Try to block it so everyone needs to

Play good in the sandbox everyone needs To play friendly and we need to all Remember that the reason we're doing the Founder liquidity is to remove Financial Concerns Financial risks for the founder So that the founder can focus freely on Their 1 billion plus exit and this is Our our line of argumentation is it Always accepted Um not not always but when the The most sophisticated end of the Investors they actually like it they see Us as a solution to Um to the problem rather than something That they would feel wary about just one Final thing also we Don't Play Big Discounts we don't play in the Situations where there will be 60 50 60 discount Um on on the pricing which again alerts The existing races on what's going on Here Um what exactly are you playing because They will then have other issues of how They carry the value on their books but Also because simply because you're Offering liquidity it doesn't give you The rights to apply a 60 discount on the Previous round especially if the Business is doing well Yeah and I'm curious Amir if you've run Into any pushback over the years or Thinking of these different both founder Liquidity as well as employee liquidity

That you've heard from that's a Conversation that we and the the great Description from Maria about the process Just Illustrated for everybody how Difficult really it is to get those kind Of deals or where they are Um and I think that is the honest Situation and phase I want to see more Companies that are creating basically an Overall program for employees to take Advantage of deals like this and last to Make it like uh like an uh a privilege That really is available only to the Founder of the company like this there Is no reason if The Foundry so Incentivized to do it they're probably a Few other employees that are in an equal Situation so Um as I said I've seen only a few deals Like this every time it was something Like uh Maria described so Um yeah it's pretty sad but it's good That it's the last session of the day so You can go and drink later Can I have one thing what kind of one Thing of course yeah the one thing I Would also say is you know we're talking About liquidity in different ways some Of it's kind of like company sponsored Liquidity so a group comes in like Beacon and says we want to do this thing And you talk about the board and you Kind of agree to it there's also the Secondary Mark which people will talk

About and that's individual investors And I mean I don't know if you play you Probably go direct the company but There's some groups that will actually Reach out to a Founder an early employee That's still there or maybe is left and They will want to buy shares from them Directly in this secondary market and That's where Brokers get involved and There's there's lending platforms like Equity B and others and there's kind of All different structures that are out There and you know I think that Ultimately like what I would say and as A broker I saw us a lot and I even see It now with our with our data platform Is you know when liquidity is is Approaching you you're it's very it Would be very good if you took some Because I think everyone wants to Believe that oh my gosh we're a rocket Ship we're killing it this is always Going to be available to me I'm going to Wait until it doubles again and it's Like it's kind of like the eye of Sauron You know the market sees you and they Want you and and then they just honestly Something else and liquidity can Evaporate immediately and within a month Sometimes and so when you do get Opportunities as a founder or to do Something more programmatic for your for Your own employees I would say even if It takes some pushing internally like

Really pursue that because Beacon may Want you today you may miss some Milestones and then you know maybe it's Maybe it's they're on to something else And so don't think it's always going to Be there because it unless you're SpaceX Or one of these companies it just isn't Always there it's episodic and just you Should know that as a Founder um and Anyone tells you different and they're Not telling the truth so yeah the best Advice of the day And reminder for the folks in the Audience if you guys have a question Definitely approach the microphone flag Your hands so I can see you yeah go Ahead Hey everyone so uh what would you Recommend for the pre-seed startups how To allocate shares for team members and How would you structure like overall if You have like a two three main Founders And how many shares you should allocate For the team members So the question from the audience is as A pre-seed Founder how should you Approach this how many shares should you Issue Etc Yeah so they're uh Pretty Well-known standards on what should be The but you're basically asking about The size of the pool that is available For options and every company is

Different and it depends on how many Founders you have and what kind of round But I my experience I found that I do Need about 15 to sometimes 17 percent of The company available over time it's Getting And it depends again on the situation And what kind of functions your Co-founders actually cover how many Senior Executives you will need to bring To the room but you need to do a budget Just like you do for money you need to Do a budget for options And bear in mind that in every round the Investors will Top up the options pool So in every round typically until Serious B at least the investors will Say right let's top up that the option Is cool to take it back to 10 because The whole point of the round is to to Recruit Talent and talent willing to be Incentivized with options so you You'll have to build that in mind and For early people set aside 10 as like Serious FF shares or something that can You know convert and be sold in future Rounds just in case Thank you thank you can I have a Question Um I would like some sorry um no go Ahead Um I would like to know what advice you Would give like there's power Dynamic I

Mean I work for a non-profit and you Know there's always power Dynamic with Funders and uh through the years I have Learned that there is nothing better Than always speak with the truth it's The best thing but when you're new in The field and you or for the first time You know in in front of a possible Investor and and when you are meeting Someone you want them to be very Transparent but what what have you Learned as a strategy for you to break That barrier that sometimes might Interfere with you seeing the real Person So the question from the audience is Sort of how can you break down the power Dynamic and sort of find that Transparency with who you are speaking With So first of all I disagree with the Power dynamics like if I read between The lines even like the the VCS of some Amazing power over the founders and so On I actually think it's the reverse I Think there are very few great ideas and Great teams that can execute on them and This is excuse me Maria really are Giving you the absolute uh uh most uh Commoditized commodity Um so I think that first of all you Should go with this approach you have Something unique you're working on Something great you have the potential

And sandal road is full with with VCS so That's first of all the approach then You need to understand okay what are They looking for and what they're trying To do and basically they are trying to Minimize risk and your job is to help Them understand how little risk there is In your Um Venture and that can be technology Risk Market Rich the timber is different Kinds of risks and be proactive about This I don't think the thing is to be You know overconfident or overselling is Just to be very specific about your plan And also being proactive about talking About those challenges if you think that The VCS are not gonna ask you the right Question it's usually not the right Tactics so just be upfront talk about All the challenges ever planned to Mitigate each one of the risks and find The right partners Remember guys the the VCS have power Until they write the check and then we Are the most exposed party Um you can possibly Have in your organization because there Is very little we can do yes there are All these terms and consent matters and Control matters it's all Bs we can't do Nothing the moment we hand over the Money so it's back to your point no it's Not the power is on the other side Definitely we have the best job in the

World let's admit it Founders now Seriously we do what we love they're We're getting paid for this and we still Have a massive upside like be a Founder Start a company that's my advice Sorry hi my name is ayush my my question Is kind of a follow-up from the previous Question here as a precede I don't even Know if I'm pretty pretty something Founder uh I'm not focused at all on These questions I'm just focused on Building and so At a high level should I just when I Raise trust my VC to kind of help me Solve these problems and I just try to Pick a VC who has a good track record or Do I trust my lawyer phone to do this For me or do I just read the entire Internet and figure it out myself how It's quite intense you said trust the VC Yeah yeah yeah So yeah pre-something right so I don't Know look I think if you go with a Lawyer that's that's that specializes Like a Gunder or something like that They're going to be able to give you a Range of A kind of a range of where people are Typically Landing right now something That's defensible you could take to your Investors and you can say well look you Know Gunder says this is fine or this is Within the reasonable allocation but you Should ask about a lot of the things

That we talked about today I think you Should ask about do a little bit of Research a lot of it's been driven by You if not they're just going to give You the stock documents you're not going To read them who does and you're going To go forward and later on you're going To say oh I really wish I'd taken a few more Minutes to look at that and be asked a Few more questions so I think if you get The right lawyer you can you can rely on That after all you're their client Um I wouldn't ask the VCS what they Think I mean I love their wonderful but Yeah you're going to get a very Different answer I've been like a Whipping Boy here Thanks guys you can ask her but no other VCS foreign Also I think that people Um The question is okay what's the brand Value of the VC like how much should I Prefer a brand name VC and I think that When you look at the term sheet the most Important thing is not the the other of The letter but but really what are the Terms what are you signing up for uh What kind of preferences and writes this Specific investor is looking for and Then after that I would ask who is the Partner that you're actually going to Work with and how much this person

Specifically is a good fit for you and Your company and then Gunderson can Definitely help you get a Don't ever get a VC unless you speak to One of their portfolio companies guys You reference the hell out of us in the Same way we reference you you need to Know how do we Play When the the things are not going Well yeah that's that's the the most Important question I would ask if I Wanted to work with a VC it would be Show me a situation where things were Not well and give me the company name And the number of the CEO I want to talk To them totally thank you this is very Helpful so I have a question that lends Back to the employee liquidity you Mentioned in 97 you know your exit was Only at 3 million now we're raising Rounds at friends and family and precede And the trigger points on these Qualified rounds to even enter that 409a That you know the valuation set the Strike prices kind of like 10 million Dollar raises so it's pushing that out Years you know to raise a friends and Family to go into a precede to go into a Seed before you're even serious in the Round that a employee would even have The ability to even go to a secondary Market do you see value in lowering down Those qualified round trigger points to Maybe converting people into a 409 like

Way quicker having that series round Faster or just still kind of Follow that Cookie cutter you know five ten million Dollar trigger before a qualified round Happens we have 30 seconds that's uh for The experts uh I would say that uh I Would not I would would not optimize for That I would do what's best for the Business first and foremost ultimately a Secondary Market is going to come is Going to be built around your company Because you're doing very very well Oftentimes it's a little bit later and So precede very often there's no unless You're the hottest thing ever there's no Market anyway so I wouldn't worry about That I would I would think about that a Little bit later so some of the things We talked about today so you're ready For it and and tell your team you know How you're going to approach it and then If you're lucky enough to build a Business that's doing well enough to Have a secondary Market emerge you know You'll be ready for it perfect sure and Unfortunately that does put as that time I know it looks like some people still Have some questions so hopefully we can Answer those outside of the stage but Please join me in thanking the panelists Today thank you thank you thank you

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