That’s a LONG time (in total) for employees to wait for liquidity. Yes, they likely provided some opportunities for early employees to liquidate some of their holdings, but it’s got to suck to sit on that much funny money for so long.
A direct listing would be very unfair to the banks that have patiently waited years to take a multi-billion-dollar chunk of Stripe’s upside in exchange for setting the IPO price (integer between 20 and 50).
but at least in an IPO the company would get a financing round, and the banks get to manipulate the market with a stabilizing bid indefinitely
direct listings completely rely on retail buyers for liquidity, and even in the frothiest markets that's not enough money in the face of all employees and the company dumping shares immediately
> direct listings completely rely on retail buyers for liquidity, and even in the frothiest markets that's not enough money in the face of all employees and the company dumping shares immediately
IPOs typically have a lockup period, which means that employees will always be selling to retail buyers, whether on Day 1 with a direct listing or Day 90/180/etc. when the IPO lockup expires.
They've had several options for employees to liquidate some of their holdings before now. They've generally only been open to current employees, but one a few years ago was also open to past employees.
Noob question that I am sure is answered many times. What are the catalysts for a private company switching from options to RSUs (double trigger). In my previous role I got RSUs (double trigger), but now at a much smaller startup I have an option package. As an employee RSUs are a bit easier to make sense of, but both are equity instruments at the end of the day. When, and why does that transition happen?
> What are the catalysts for a private company switching from options to RSUs (double trigger).
For employees at very early companies that are going the venture route, ISOs are a no-brainer. The company is small enough that the strike price isn't too onerous, the company is too small to hit up against the IRS limits, and they provide pretty good tax treatment under the assumption that the company will grow massively in value - like, 100,000x - which is the the optimistic case that everyone wants to optimize for.
For employees at late stage companies (e.g. last funding round before IPO), ISOs are a rough deal. The strike price is large, so the only people who can afford to exercise them before a liquidity event are people who are already independently wealthy. The tax benefits are also still present, but smaller, because the expectation is that the company might grow 10x in valuation, but not 100x or 100,000x (most $100M companies are not going to grow to $10 trillion in valuation).
RSUs avoid that problem, by requiring zero cash up-front, in exchange for less favorable tax treatment in the "company grows 100x-100,000x" case - which is fine, because that's less relevant.
Of course, the billion dollar question is where the inflection point happens - when do RSUs become a better deal than ISOs? There's no universal answer to that, and some of that depends on specifics of the company, and some of that also depends on who you ask (certain people will benefit more than others from the switch at different points, so it depends on how much the company is weighing each of those [metaphorical] stakeholders).
ISOs also have one other advantage for companies: because they have to be exercised within 90 days of departure, a large portion of ISOs that are granted will never actually be exercised (the employee will choose to leave them unexercised, either because they don't have the money to pay for the exercise price + taxes or because they don't want to). So every option granted is <1 share actually given up (in expectation), allowing the company to grant bigger compensation packages (because some portion of those will not actually be used, and can therefore be reallocated to someone else).
With RSUs, every RSU granted is 1 share actually given up (except in the case where the RSUs expire, which makes the company look bad).
At Stripe, when your RSU vest, you still don't have the ability to buy the shares. Instead you have to wait for a liquidity event, or for 7 years to pass (making the shares worthless).