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Why Educating Startup Employees About Equity Is As Important As Giving It

This is the final article in a three-part series on the benefits of giving all startup employees equity. See the first piece here and the second one here. A year after I moved to Chicago, I attended a women’s networking event, where an employee of a recently-acquired startup entered the room. Folks were excited to see her, congratulating…

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This is the final article in a three-part series on the benefits of giving all startup employees equity. See the first piece here and the second one here.

A year after I moved to Chicago, I attended a women’s networking event, where an employee of a recently-acquired startup entered the room. Folks were excited to see her, congratulating her on the exciting news and asking questions about what life was like post-acquisition.

Among other changes, she talked about how they were preparing to double their team to 50 people, leading me to believe that she was a rather early employee. I had never met her but was impressed by and happy to celebrate this 20-something woman who had helped drive a startup to a successful exit.

When she and I introduced ourselves, I congratulated her and said I hoped she did well in the acquisition. To my surprise, her response was to brush off my comment and say, “Oh, we’re not a publicly-traded company.”

I stood there, slowly realizing that not only did this woman not benefit from the acquisition that she certainly helped manifest as an early employee; she didn’t know that she could have benefitted from it.

As I mentioned in my first article in this series on startup equity, employees’ lack of understanding about equity is a common justification I hear for why Chicago startups don’t give it to them. And this is a vicious circle that we must disrupt.

If we never give employees equity, they will never have the opportunity to understand its effects and value. Giving and teaching employees about equity is not only the right thing to do for the people working daily to help founders and investors build a valuable company; I argue that it’s critical to helping foster an ecosystem that retains its best and most experienced talent.

Let’s consider the woman I mention above. She had no understanding of how startup equity worked or that she could be living a very different life today—at least one with less financial burden. Her perception of what it means for a startup to be acquired—which could have been a lucrative experience for her—is one of the most painful parts of an acquisition: merging two different companies’ cultures, adapting to more bureaucratic corporate policies and processes, and then experiencing the pain of layoffs. In fact, just over a year after the acquisition, I learned that she was part of the merged companies’ subsequent downsizing.

When we look at this woman’s experience through the lens of attracting and retaining experienced startup talent, why would she—someone who helped steward a company to a successful exit—ever join a startup again? She could instead go to a more established and stable company, earn a comparable (if not higher) salary, get better healthcare benefits, and not endure such emotional and operational volatility.

It’s true that people will have a difficult time fully grasping the opportunity that equity poses if they haven’t experienced or witnessed close-hand the effects of a liquidity event. However, the nebulous nature of equity and employees’ lack of understanding of it shouldn’t be a reason to not grant it. Rather, it’s on companies to help their teams understand and value the opportunity that equity poses.

In my experience, I’ve seen companies of different sizes handle this differently. When I was at Uber, new employees went through a multi-day on-boarding program at headquarters called Uberversity, where an entire session was dedicated to teaching new hires about what equity means and what it looks like for a company to exit.

It was led by a financial executive who did not, of course, provide tax advice but gave the equivalent of a lecture on what the different terms mean. In smaller startups that I’ve been a part of, we held equity tech talks and guest panels that included both investors and lawyers who could help employees understand the nuances of it.

Why go through all of this trouble? There are a number of reasons. Having a team that feels personally and collectively invested in building a valuable company can be very advantageous to the company’s day-to-day operations and long-term growth. It helps inspire accountability and collaboration during the smooth parts of the company’s journey, not to mention camaraderie and resiliency during the twisting and bumpy roads that the startup will inevitably navigate.

The value of explaining equity to employees extends beyond inspiring collaboration, though. It also shows that you value your employees enough to give them a piece of the upside of an exit. This commitment to your team members is reinforced when you show them that it’s worth taking time out of the daily startup grind to help employees understand what you’ve offered them.

A mentor of mine says, “If you want to know what someone values, look at where they spend their time.” Investing time in your employees’ career growth and financial literacy will help ensure that employees continue to invest their time in your company.

The more that companies do this here in Chicago, the more experienced talent we’ll see stay. And the more experienced talent that stays and benefits from successful company exits, the more companies they will launch here. And if we get those two pieces right, Chicago’s ecosystem will grow as more and more outside talent sees the Windy City as a place where they can flourish.

Originally featured in Chicago Inno.

Source: https://hydeparkangels.com/educating-on-equity/#utm_source=rss&utm_medium=rss&utm_campaign=educating-on-equity

Private Equity

Boston startups expand region’s venture capital footprint

This year has shaken up venture capital, turning a hot early start to 2020 into a glacial period permeated with fear during the early days of COVID-19. That ice quickly melted as venture capitalists discovered that demand for software and other services that startups provide was accelerating, pushing many young tech companies back into growth […]

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This year has shaken up venture capital, turning a hot early start to 2020 into a glacial period permeated with fear during the early days of COVID-19. That ice quickly melted as venture capitalists discovered that demand for software and other services that startups provide was accelerating, pushing many young tech companies back into growth mode, and investors back into the check-writing arena.

Boston has been an exemplar of the trend, with early pandemic caution dissolving into rapid-fire dealmaking as summer rolled into fall.

We collated new data that underscores the trend, showing that Boston’s third quarter looks very solid compared to its peer groups, and leads greater New England’s share of American venture capital higher during the three-month period.

For our October look at Boston and its startup scene, let’s get into the data and then understand how a new cohort of founders is cropping up among the city’s educational network.

A strong Q3, a strong 2020

Boston’s third quarter was strong, effectively matching the capital raised in New York City during the three-month period. As we head into the fourth quarter, it appears that the silver medal in American startup ecosystems is up for grabs based on what happens in Q4.

Boston could start 2021 as the number-two place to raise venture capital in the country. Or New York City could pip it at the finish line. Let’s check the numbers.

According to PitchBook data shared with TechCrunch, the metro Boston area raised $4.34 billion in venture capital during the third quarter. New York City and its metro area managed $4.45 billion during the same time period, an effective tie. Los Angeles and its own metro area managed just $3.90 billion.

In 2020 the numbers tilt in Boston’s favor, with the city and surrounding area collecting $12.83 billion in venture capital. New York City came in second through Q3, with $12.30 billion in venture capital. Los Angeles was a distant third at $8.66 billion for the year through Q3.

Source: https://techcrunch.com/2020/10/23/boston-startups-expand-regions-venture-capital-footprint/

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Private Equity

Alternative Investments/Real Estate: Housing Market Demand Is “Insane”

Speaking to CNBC on Power Lunch, Glenn Kelman, CEO of real estate brokerage Redfin (NASDAQ: RDFN), said he expected the current boom conditions in the housing market to last well into next year. He attributed the high demand to affluent professionals looking for remote homes as well as low interest rates. Also, he thinks some sellers will put their properties on the market only after the presidential election.

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Alternative Investments/Real Estate: Housing Market Demand Is “Insane”

https://platodata.net/wp-content/uploads/2020/10/alternative-investments-real-estate-housing-market-demand-is-insane.jpg

Redfin CEO Glenn Kelman says the boom could last into next year.

Speaking to CNBC on Power Lunch, Glenn Kelman, CEO of real estate brokerage Redfin (NASDAQ: RDFN), said he expected the current boom conditions in the housing market to last well into next year. He attributed the high demand to affluent professionals looking for remote homes as well as low interest rates. Also, he thinks some sellers will put their properties on the market only after the presidential election. (CNBC)

Kelman: Too good to last forever

“This level of demand is absolutely insane. I would expect it to last into 2021, at least,” Kelman said.

Recent data from the National Association of Realtors shows up the strength in the housing market.

Existing home sales shot up 9.4% in September beating expectations. Even though the median purchase price of a home rose approximately 15% year over year, there is just a 2.7-month supply of for-sale homes, showing tight market inventory conditions.

The 30-year fixed-rate mortgage averaged 2.80% for the week ending Oct. 22, down from 2.81% in the previous week and 3.75% a year ago, according to the Freddie Mac Primary Mortgage Market Survey. Therefore, mortgage rates crept even lower in the latest week.

However, “there’s no way it can last forever,” Kelman warned of the bullish conditions.

Canada: Off the charts

Meanwhile, at the northern neighbor, home sales activity in September is described as “off-the-charts.”

Housing data released by the Canadian Real Estate Association (CREA) last week showed a nationwide year-over-year increase in sales of 45.6%.

This was a new all-time monthly record for the third month in a row.

“This is starting to sound like a broken record (about records being broken), but Canadian home sales and prices set records once again in September … as they did in July and August,” said Shaun Cathcart, senior economist at CREA, in a statement.

Real Estate ETFs in the U.S.

The year-to-date performance of some real estate ETFs is shown below:

iShares U.S. Home Construction ETF (ITB)              +24.61%

SPDR S&P Homebuilders ETF (XHB)                          +20.83%

Vanguard Real Estate Index Fund ETF                      -13.91%

It may be noted that despite the boom conditions in housing, real estate ETFs and stocks have declined in recent days.

According to Barron’s, this may be due to yields on the 10-year and 30-year Treasuries moving higher in recent weeks.

Other reasons could be fears of inflation ticking up in the future amidst an improving economic situation.

Nevertheless, the view is that interest rates are likely to remain low for longer. So demand may remain strong.

“Part of what is fueling this boom is that the economy has just split into two and rich people are able to access capital almost for free, so, of course, they’re going to use that money to buy homes,” said Redfin’s Kelman.

Related Story:   Mortgage Rates Set Another Record Low; Real Estate ETFs Could Benefit

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Source: https://dailyalts.com/alternative-investments-real-estate-housing-market-demand-is-insane/

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Private Equity

Asda’s new owner EG Group seeks new leadership ahead of IPO – report

EG Group is owned by the billionaire Issa brothers and the private equity firm TDR Capital, who teamed up for a £6.8 billion takeover of Asda last month

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UK grocer Asda Group’s new owner EG Group is looking for a new chairman and independent directors as it prepares for a £10bn initial public offering, The Timesreports.

EG Group is owned by the billionaire Issa brothers and the private equity firm TDR Capital, who teamed up for a £6.8 billion takeover of Asda last month.

The move comes after Deloitte resigned last week as the company’s auditor because of concerns over the group’s governance and lack of internal controls, according to the publication.

A decision on candidates will be taken before the end of this year, although roles haven’t been finalised yet as the company is in the process of deciding whether to float in the UK or the US, The Times reports.

Write to Barcelona editors at barcelonaeditors@dowjones.com

From Dow Jones Newswires

Source: https://www.penews.com/articles/asdas-new-owner-eg-group-seeks-new-leadership-ahead-of-ipo-reports-20201023

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