There's also just the case that a buyer is happy buying say 88% of the company and having 12% (usually non-voting) shares lie with employees/former employees. Stock options are only really, truly worth anything if they IPO.
Equity can be worth something via acquisition from private equity doing roll-ups, corporate buyers looking to fill strategic product niches, etc
Also, for the more heavily vc-funded late stage still pre-ipo plays, secondary market, which can be at a discount to the most recent vc round, or in some rare instances in a hot sector, premium.
One other thing - waiting for the IPO might be the worst thing to wait to do. The public markets are much more fickle than private markets. Once a company IPOs, there's usually a trading moratorium on insider shares, usually 180 days, so by then, the equity value may have completely imploded.
Lets say you've got
Founder A 25% - Voting, Founder B 25% - Voting, Investor A 10% - Voting, Investor B 15% - Voting, Investor C 8% - Voting.
Former Employee A 0.5% - Non Voting, Former Employee B 0.4% - Non Voting, Employee C+ 0.2-0.3% each all Non Voting.
If say Big Co want's to buy the company why do they care about buying out former Employee B? If they can pickup the two founders and the three investors, thats enough for complete practical control.
> Stock options are only really, truly worth anything if they IPO.
I’d have bought huggingface, openAI, anthropic, unsloth, and many others stock right at this moment if I could get in for less than 10K.
Prove me wrong internet. I’m ready to buy in these companies this minute.
We can argue whether the accredited investor process is good or bad (I think it’s more good than bad), but I don’t blame companies for not wanting a bunch of $872 high roller outsiders on the cap table.
You really need some kind of a proxy to aggregate anything less than that in practice - thinks like crowdcube or similar. Can you imagine having to draw up paperwork just to transact $1200 or something? Doesn't make much sense.
As one example, SpaceX is privately held but routinely does funding rounds with large investors so employees can sell shares and access liquidity[1][2]. A $10,000 minimum purchase amount is trivial for those investors.
[1] https://www.reuters.com/markets/us/elon-musks-spacex-raises-...
[2] https://www.reuters.com/business/aerospace-defense/spacex-fu...
If $10k or $25k is an amount of money you have to pause to think about at all you have zero business investing in early stage startups. Simply by the way the math works out you are better off buying lottery tickets because at least then you'll get to scratch something off before going bankrupt.
Folks who work in AI/ML know how to invest in the space! You're welcome to ignore the fact that Unsloth is objectively going to pop off (likely be acquired by huggingface) and anyone who invests in it will come out ahead.
If you want to gamble that's your right I'm sure there is a roulette table somewhere near you. But the social harm caused by allowing dentists and grandmothers to invest in seed stage startups greatly outweighs any social good caused by letting that near-zero overlap get rich a little easier.
In reality, my project needs funding now. If i bootstrap and get customers, I don’t need to worry about your lunch money. I need someone (or customers) who can fund that same amount for a year.