Employees are increasingly becoming mercenaryand feel entitled to treat private options as public stock. If allowed, what would be the point of being a private company?
Dick Costolo is sharply nipping this in the bud at Twitter. It’s being portrayed as restrictive, but it’s anything but. In the grand scheme of private companies, he’s still being outrageously pro-employee.
Pre-Facebook no one was allowed to sell private shares– the very idea was antithetical to the foundations of Silicon Valley. Employees get options so they are incentivized to work hard and help build a big company. The idea has long been that everyone– investors, founders, and employees– all make money at the same time. And that time is when a company goes public or gets acquired.
That started to change in the mid-2000s. Facebook pioneered incredibly favorable terms that allowed employees to sell stock, and help orchestrate buy-outs like the DST one in 2009.
There are unquestionably good things about the liquidity landscape changing in the Valley, particularly as IPOs get pushed farther and farther out. I have always been a big fan of partial liquidations for founders. It satisfies a near-term cash crunch and aligns incentives to build something for the long-term. And Facebook’s deft use of secondary markets allowed the company to focus on building a huge business without the distraction of IPO pressure.
But this was always the looming other side of the coin: Coddling a hopelessly mercenary culture that demanded instant liquidity when they wanted it.
Read all here.