Silicon Valley Self Regulation

Story One

Forced Discounted Equity

 

Employees at a high growth company were told they could only get liquidity if they sold their shares at half the price set at the last round

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There are many employees at high growth companies who learn that gaining liquidity can be more difficult than it ought to be. Consider Jessica, a full stack engineer at Replacementr. Jessica joined while Replacementr was a Series B company, and had her shares’ price set at $12 per share. Their growth explodes, and they raise a new round, Series C, to help accelerate their growth. Jessica hopes to use her shares to gain some liquidity after this happens, but learns that she can only get that liquidity by selling her shares at $6 per share—half the price that she had originally been given as part of Replacementr’s B round organization. Does this present a situation that the company should address?