Over the last two decades, the timeline for companies to seek an entry to the public market has increased.1 This public market parade has only confirmed the story that data is telling us – companies are choosing to stay private longer.
With venture capital money flooding into the private sector and generally fewer regulations to comply with, remaining a private company offers the flexibility to grow and innovate at high-speed. But, what happens to shareholders along the way?
Private companies often grant equity-based compensation to retain talent and drive performance. Shareholders in the private market are holding onto equity waiting for the moment they can transform their stock options into monetary wealth.
Where did all this begin? Well, quite fittingly, it began with startup companies. When your company is just starting out, cash can be limited. Granting equity compensation may supplement cash to attract and incentivize the talent you need to grow your business.
Startup Equity Basics
As a startup company leader, here are a couple things that may be helpful to have as you administer your equity program: