Fenwick & West LLP put together another survey on the state of Unicorn financing.
Here are the most important bits:
- Entrepreneurs are becoming managers of companies instead of owners. The exit preferences really show that the investors are buying the company with an option to sell.
- Employees are really going to get screwed. Unless these companies are going to IPO investors are getting premium talent at a discount that only gets covered post IPO. And for employees who are looking at 10b exits these are rarer than a unicorn.
- Valuations are rigged to make the company look bigger to convince employees that the risk is lower so they join. We’re not an early stage startup we’re a big established company with massive stock upside (if and only if we net 10 billion post IPO)… Take this lower salary and smaller stock package because it’s a sure thing ™… Except it’s not.
Net net the game is rigged.