Merlin

Director of Sales

Maximizing Comp thru Equity Hopping

I was reading some comments on a forum dedicated to achieving financial freedom. There, a user posted a strategy about hopping from late stage pre-IPO companies every 4 years after their initial equity grant runs out.

It got me to wondering what some of the war room members might think of this or other strategies employed!

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braintank

Politicker

Enterprise Account Executive

I mean... you're counting on all of these companies IPO'ing.

It's akin to buying a lotto ticket every day to help you retire.

Yes, you might get lucky, but you odds are you'll pay a bunch of money for worthless paper.

In my opinion if you want to get wealthy find good series C/D companies that are poised for growth. Go sell a SHIT ton. Then, hope for an IPO-exit as the cherry on top.

Merlin

Valued Contributor

Director of Sales

Agree with most of this. I was also thinking perhaps PSUs and RSUs vs. options. Also, could apply to early post-IPO that still give equity, no?

braintank

Politicker

Enterprise Account Executive

Yes, equity is a path to wealth. But it requires a lot of things to go right.

I've been a part of 2 exit events (one IPO, one acquisition). In both cases the $ amount I received was less than my commission on a juicy deal. The RSUs I received working for a public company after company 2 was acquired had measly returns. I sold and put into VTI.

In my opinion too many variables to rely on equity as something more than a windfall. The only people I've seen get filthy rich off equity are those who join seed or Series-A, but having joined a handful of those I generally advise against it.

The best equity hack is ESPP. If your company is offering one and you're NOT participating you're passing up free money, literally.

Sunbunny31

Politicker

Sr Sales Executive 🐰

ESPP is awesome. That's one perk I miss at my new company.

Merlin

Valued Contributor

Director of Sales

Good feedback thanks! My company actually just dropped the one year holding period on ESPP so it’s even more enticing now.

braintank

Politicker

Enterprise Account Executive

Didn't realize they could do a 1 year holding on espp! I always auto-sold mine. If I can get a guaranteed 15%-20% return I'll take that all day!

DungeonsNDemos

Big Shot

Rolling 20's all day

All he has to do is pick the companies that will IPO... It's easy money!

braintank

Politicker

Enterprise Account Executive

Right! Don't forget once IPO line only goes up 🙄

Rox

Head of Sales

Realistically; you need to get in EARLY to really have a meaningful shot at equity having value.

And then, the company has to do well.

And then, you need to either stick around for a liquidity event or have some way to actually buyout your shares when you decide to leave.

Joining a late stage pre-IPO company is going to be more of a sure thing. But the company isn't going to be handing out $5m equity slices to random sales reps in a late stage series D company with a clear IPO path infront of them.

Realistically, in sales, you best path is to put very very minimal value in equity and focus entirely on hitting the 2-4 year gravy train where the product is incredibly sellable and the company hasn't come back around to re-working comp plans to minimize your ability to go over quota.

As someone that has gotten sucked into the equity game; you end up sticking around too long in companies in order to vest. Or hoping that IPO is around the corner. Or being tied into equity you cannot afford to exercise.

Its way easier to just be a mercenary, go in, maximize your w-2 for a few years, then go elsewhere if the tides start to turn.

Merlin

Valued Contributor

Director of Sales

Awesome insight shared here, thank you! Now here’s the question. How do you find that 2-4 year gravy train?

braintank

Politicker

Enterprise Account Executive

Very well said @Rox

@Merlin I've found that gravy train exists in Series C-D startups. They've de-risked the business and have a maturing product and just need hunters to go out and KILL.

CuriousFox

WR Officer

🦊

What if the company doesn't make it? Doesn't IPO? Sketchy.

DungeonsNDemos

Big Shot

Rolling 20's all day

Idk if "4 years" counts as hopping, but most of the time equity is a lottery ticket and it helps to focus on selling as hard as you can to maximize immediate takehome pay.
Good luck on the FIRE plans

Ackerman123

Executive

Enterprise Sales

What about a company selling out to Private Equity? Do vested shares still get compensated at the multiple the company is purchased at?

NotCreativeEnough

Big Shot

Professional Day Ruiner

I joined my current company in January of this year. I was given 3200 RSU's as a sign on bonus. Based on the companies current valuation that's about $42 per share. They're positioned to IPO late spring/early summer. I don't see why I wouldn't want to do that all over again in 4 years. Especially because if you're hopping to companies with truly disruptive products, you'll make bank selling it while you're there too.

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