As an early employee, I own a part of a startup that’s about to IPO. These shares constitutes almost all of my wealth. As an aspiring conservative value investor of age 30, how much and at what rate should I sell off my shares after the IPO?

Goodness. Congratulations on the IPO! But what and how to sell is really a tough one.

If you’d sold shares in almost any SaaS/Cloud IPO in the past 7 years, you’d feel a bit of a fool:

I did. 🙁

But it’s hard to know. Marc Benioff sold a huge amount of his Salesforce stock before its run from $2b to $85b in market cap.

  • Can you afford to lose it?
  • How much are you OK risking?

Everyone is a Genius in 2018.

Some general thoughts though:

  • Maybe sell 20% now. You can give up some future gains to lock in some actually liquidity today.
  • Taxes are important, and confusing. Paying a ton of taxes now to hold for the future can be awfully risky, especially if the taxes are very high. Don’t put your financial health in jeopardy to pay a ton of taxes now in hopes of selling for a higher price later.
  • What if the stock price falls 50%? Are you OK with that? If so, maybe hold the rest. If not, maybe sell off over the next 2 years (see the next point).
  • Most VC firms sell off quarterly or so in the 24–30 months after the IPO. And they’ve been doing this a while. And have seen a lot of IPOs. They aren’t that OK if the stock price falls 50%, actually. So this is their general plan. So maybe this should be your default plan.
  • Maybe, sell less if you plan to stay an employee and have no tax issues. Options are options, after all. They are designed to give you time. They give you a shot at leveraging power laws without putting any cash up front. That’s special, if you are working at a winner.
  • Family first. What is best for your family? Even a relatively modest amount of financial security can be incredibly different than none at all. Even if you want to roll the dice, just double check your thinking here.

View original question on quora

Published on May 28, 2018

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