Why Underscore.vc invested in Vested

About Underscore.vc

Backing bold early-stage entrepreneurs with an aligned community designed to fit each startup’s unique needs.

• Boston, Massachusetts, United States
• 11-50
• Venture Capital
• Early Stage Venture, Late Stage Venture, Seed, Venture
• www.Underscore.VC

About Vested

Vested is helping employees maximize the value of their hard-earned equity.

• New York, New York, United States
• 11-50
• Seed
• Private
• vested.co/

Our Investment in Vested

Working for a private company can be amazing. Having the opportunity to contribute to a tightly-knit team, help build a new product or service, and the ability to professionally grow are all powerful benefits

The Equity Challenge: Understanding True Value

Financial returns are also a powerful motivator. Often the cash position of an early stage, private company dictates more modest salaries.

The hope is that employees will receive meaningful equity awards that, in time and with company successes, will be worth far more than the cash differential between a private and public company salary.

That’s the dream. There’s a problem though – and it’s not the success/failure ratio of startups (we can’t help that) – it’s that equity isn’t simple; it’s really hard to understand it’s value, how to manage it, and (hopefully) how to monetize it.

But no one really talks about this. Sure – there are plenty of blog posts and tax calculators out there – but we don’t think that’s solving the problem (and it doesn’t seem to be putting a dent in the 76% of employees who never exercise options).

Vested’s Mission: Simplifying Equity for Employees

76% of employees never exercise their options to sell their shares. 50% hold off due to fear of making a mistake. This new startup, @vestedco, is about to rock the boat and change that.CLICK TO TWEET

Employees need something more. Employees deserve something better.

Three Core Needs

Comparison

Once a person finds a compelling private company to join, often times the full monetary value of the compensation package is hard to discern.

Early-stage, private companies are notoriously hard to value. While the employee is passionate about the product and the role, passion doesn’t fund a 401K or 529 plan.

How does one compare offers or baseline a negotiation? Often companies further complicate the problem by not revealing the total shares outstanding. That’ll change.

 Advice

Once hired, equity awards tend to be forgotten; employees frequently defer consideration of equity until IPO or M&A time.

The truth is, equity awards need to be managed actively, and a monthly email saying you’ve vested shares doesn’t qualify.

Companies may point employees to generic “tax advisors” who advise on “what’s best for you”.  Beyond advice to “exercise early and often”, outside advisors cost money and have access to less information than the employee.

That doesn’t make for great advice. Employees deserve tailored advice, without unnecessarily financial and legal complexity.

Need capital to help finance an option exercise? Let us help with that. Companies are staying private longer than ever (50 unicorns are older than 10 years…), and guess what? Capital wants in – investors want exposure.

 Monetization

Ideally your company is acquired or IPOs at a great valuation during your employment. However, the average tenure at a startup is right around two years, while time to M&A is averaging 6 years and time to IPO at 12 years.

Odds are against seeing that event during employment.

An employee who has exercised responsibly is still able to capitalize on their equity though; close to 50% of companies will allow secondary stock sales pre-IPO, and a majority of those companies will allow a sale through a company structured program.

The bad news is up to 78% of these sales are left to the employee to structure; most don’t know where to start. Let Vested guide you – don’t let market professionals low ball your value.

If it sounds like we’re focused on the employee, you’re right. But guess what? This helps the company too. It’s not rocket science – do good by your employees, build a stronger company.

Conclusion

Matt Venables and I, the team behind Vested, have led teams and helped build companies. We’ve had these conversations countless times.

We wish equity was more simple, but it’s not, so we’re going to help fix this problem in a scalable, accessible, and friendly way.

Then we’ll move on to public company equity…

If you’re interested in understanding your startup equity, you can sign up for early access to Vested here!

You can read the rest of “Why we invested in” collection here:

See the collection