Psst! The Founders Of Secret, The 6-Month-Old Startup Worth $100 Million, Just Pocketed $6 Million
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Wouldn't it be nice to put in six months of work and make $6 million?
That just happened for the founders of Secret, a six-month-old anonymous social networking app that raised $25 million at an eye-popping $100 million valuation earlier this month. During the round of financing, investors let founders David Byttow and Chrys Bader-Wechseler sell restricted stock in exchange for $6 million in cash, which sources say they split.
When asked about the new-found millions, Secret pointed to its Form D filing, which seems to confirm the $6 million deal. The form shows a total offering of $30.9 million, of which $24.9 was sold for cash and the remaining $6 million sold (or will be sold) "in exchange for securities of the issuer."
It may seem shocking for such a young startup to net its founders a few million dollars without any sort of exit. Actually, these days it's almost normal.
Allowing founders of hot startups to take money off the table has become a popular motivational tool in Silicon Valley. It encourages startups to think long term and as big as possible. It relieves some of the temptation to sell the company early, which could minimize return on investment.
The idea is to let founders breathe a little financial sigh of relief, but not give them enough that they start slacking off. Snapchat's founders, for example, took $10 million each during their latest round of financing. In Secret's case, $3 million after taxes boils down to about $2 million — hardly enough for the young ex-Googlers to throw in the towel (or even to afford a modest house in Silicon Valley).
"I’m seeing that happen more and more often," one investor said of Byttow's and Bader-Wechseler's fundraising. "The founders are giving up a piece of the outcome they could have had. What you have to gauge as an investor giving them a deal like that is, will they be negatively motivated? As long as people are careful about those aspects, it can be fine to do. Every scenario is different. At a high level, I think it’s best to keep motivation with employees."
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Alyson is the Editor-in-Chief and CCO at Fortune. She was previously a co Editor-in-Chief overseeing Business Insider's tech and business coverage.She joined Business Insider in July 2008 as the company's sixth employee. She started as a sales planner before joining the editorial team in 2010, where she became a startup reporter and was first to cover some of today's largest tech companies, including Pinterest, Tinder, Instagram, Uber and Snap. Alyson rose to become a senior correspondent, then Executive Editor.She was appointed Editor-in-Chief of Business Insider in 2016, at which point she became the youngest and only woman to run a global business publication. Under her leadership, the business division has grown to hundreds of millions of monthly readers.Alyson was a host of Insider's conferences and launched a podcast, "Success! How I Did It," where she interviewed influencers ranging from Sheryl Sandberg to Steve Ballmer about their career paths (subscribe on iTunes here).She has appeared on ABC, Good Morning America, Al Jazeera, MSNBC, CNBC, CNN, and CBC, and she has interviewed media personalities such as Megyn Kelly, technology leaders like Fred Wilson, political leaders like John Brennan, and sports star LeBron James. She is a judge for the prestigious Gerald Loeb Awards in business journalism, and has been named one of Min's Rising Stars in Media, as well as Folio's 2017 Top Women in Media.She graduated from Syracuse University's Newhouse School of Public Communications, where she majored in psychology and advertising.You can read some of her investigative articles here:— Leaked videos reveal the true founding story of Snapchat— The founder who dumped Jared Kushner: Inside the phone call that left the White House star in a fit of rage— The downfall of billion-dollar startup, Fab— How a startup that raised the largest seed round in Silicon Valley history blew itself up before it even launched— The dark side of Facebook, where people lie, cheat, and make millions— A profile of Uber's controversial CEO, Travis Kalanick— The mystery of Jody Sherman, a founder who was driven to suicide and left behind a shocking business disasterDisclosure: Alyson owns bitcoin and Snap. She is also an investor in The Spun, a sports-media startup founded by her husband.
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