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The stock market just turned in its best month since 2021, so conditions may change more quickly than many predict for high-growth tech startups. But in the short term, the window of opportunity has been closed on IPOs, and the windfall paper riches of many tech employees are on indefinite hold. And that speaks to a big issue for startup firms: managing anger and frustration in a workforce that feels like it missed the big payout.

The market has shown since last November that far too many companies went public too soon. But either way, the broader relationship between management and rank-and-file employees—particularly at later-stage start-ups—is in need of a rebalance in the current market. A lot of work needs to be done to reset how companies and employees think about stock options, IPOs, and compensation.

“Liquidity and stability are a value proposition now, and paying top-dollar cash comp. They should be going out there and recruiting like crazy,” Aalap Shah, managing director at compensation consultancy Pearl Meyer, said of firms in the financial sector going after tech workers.

Shah says the value proposition of equity is company-specific, and management needs to have a very good temperature on it from the employee base. “Do they believe the story is still there, the value, or is it just something they put in the drawer in a home office and don’t care about?”

“There is this sense of being disgruntled and anxious … ‘I’ve been in this seat doing this for some time and there was an expectation of some liquidity … why can’t I have that?’” Shah said. “Unfortunately, the philosophy, the ethos always has been, it’s an equity play,” he said.

Tender offers, as well as long-term cash incentive plans for performance, that vest like stock, are options for management to show key talent that it is not all about the IPO. To start, any company not doing a buyout analysis on their best talent is doing themselves a disservice, Shah said.

For some employees, paper equity is becoming less important than seeing an eventual path to monetization, and if there isn’t a monetization event in sight and there is no clear communication from senior management, they may be rightly asking: what’s the point of waiting around?

Transparency from management is critical, but employees, too, should be pressing for more transparency about what the future holds and where the company is trying to get, Shah said. 

“The reality is no one wants what happened in 2020 and 2021 to happen again,” Shah said. “Companies that were not ready to go public went public and stock prices cratered. Yes, some people make some money, but it’s not really worth the blood, sweat, and tears that had gone into the company.”

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