Hi, I'm Jan—co-founder of Sacra.
One of the biggest challenges that Series B and later founders face is hiring and retaining the best talent, especially with the lavish perks and salaries that Facebook and Google can offer.
We created this calculator to help you understand how to design a recurring liquidity program and how it can make your liquid compensation competitive with the typical compensation of a Facebook E4.
Time-to-upside in startup compensation
"Time-to-upside" refers to how long it takes for your yearly liquid compensation to hit break-even with public company compensation, in this case Facebook's.
On the flip side, no amount of float will keep the comps equal. Float is ultimately about reducing your company's time-to-upside so that the team is aligned and your liquid comp can hit and surpass that of Facebook's as the company grows.
The biggest trade-off with increasing your float is employees losing out on that growth: the earlier they sell, the more they'll miss out on the future appreciation of their stock.
In the case of a Series B company worth $100M and growing 150% year-over-year, a float of 20% offers a time-to-upside right around 3 years and leaves an employee with $2.2M in carried equity at the end of year 4.
We've compiled products and services that help you implement a recurring liquidity program. If you want to discuss in more detail, just send us an email at founders at sacra.com.
Why offer recurring liquidity?
The founders of Fairchild Semiconductor pioneered the idea of making employees part-owners in 1957. But they never imagined that tech companies would one day stay private for an average of 10+ years before going public, that it would be impossible for employees to buy housing in the cities where they live, or that they would end up stuck in jobs they don't want because they have all their net worth tied up in illiquid stock.
Recurring liquidity is coming—your opportunity as a founder is to choose to do it sooner rather than later:
- Liquidity means employees don't just participate in the upside of a company at some future date, they're regularly winning and seeing it in their lives as it’s happening
- For founders, liquidity creates alignment on the cap table by moving equity from the hands of those who don't want to hold to the hands of those who do
- With more turnover on the cap table, investors can be investors for the stages of the company where they can be a true value-add, and then make room for others
There’s been a gradual rise of interest in secondary sales as companies have stayed private longer and late-stage companies have realized they need to offer competitive liquid compensation to attract and retain the best talent.
End-to-end liquidity solutions
Prime brokerages
Secondary funds
Want to offer recurring liquidity?
If you're interested in setting up a recurring liquidity program for your early angels and employees, send us an email at founders at sacra.com with the subject line, "Liquidity".
Sign up to join our founder webinar and Q&A on liquidity program design.