In Dana Jr’s book, we learn of the power of the captain of a ship to control his employees. Stuck on a boat, on the edge of the known world, with no way to get back home, the sailor lived and died at the whim of a captain. And what struck me, as the most horrifying part of all, was that a sailor who signed on for two years could suddenly find himself signed on for 10 or 12 if the captain os the captain’s employers so decided.
Employees at startups are like sailors on a boat. The early founders are like the captain sitting behind the mast in their more comfortable digs. The investors are like the people who invested on the journey and expected the captain to return with something. The employees are like Dana Jr, promised a fun trip and profit while living in squalid and miserable conditions.
Again, every company is different. And you should have your lawyer or an HR person who does not work for your new employer review all and any of your paperwork.
Why write about this again?
- Companies are staying private for 11 years. And why not, the senior investors – founders and early investors – don’t have to IPO to get liquidity. Mezzanine investors and later employees are stuck waiting for a liquidity event for a very long time. There is a big difference between 4-5 years and 7-11 years
- The secondary market that I hoped would help is closed.
- There is nothing to push a private company to go public with the JOBS Act. The 500 shareholder minimum got removed. A private company that has access to capital is cash rich, and whose core founders and investors are well off, has no reason to go public. For a consumer company, that is particularly true. For enterprise customers, potentially less so. Customers of enterprise customers like to see your financials before they buy your products.
You can get stuck in a Roach Motel if you work for a startup.
There is a real danger here.