More Startups Help Workers Cash Out Before IPO

Twitter IPO

Startup employees with an equity stake generally can’t cash out until the company goes public or is bought out. But a growing number of workers want the cash now – and more companies are offering them a way to get it.

Aiming for a valuation of $5 billion, payment startup Square is raising money that would allow the company to buy employee shares, and companies including SpaceX, Evernote, SurveyMonkey and WordPress creator Automattic have been helping employees sell their stock as well, according to The Information.

The startup EquityZen launched earlier this year specifically to help employees sell their shares. It has attracted nearly $12 million in equity shares that employees want to sell. The company matches equity-holding employees with investors who want to buy their stake.

On the online private-equity exchange SecondMarket, employee sellers accounted for more than half (59.8 percent) of private stock sales during the first half of 2012, up from just 11.1 percent in all of 2011.

Facebook, in 2009, offered employees the opportunity to sell up to $1 million worth of company stock or 25 percent of their vested shares and was overwhelmed with the number who wanted to do so. Its rocky IPO didn’t instill confidence that employees should wait, Bloomberg notes.

The news service quoted SecondMarket spokesman Aishwarya Iyer as saying that allowing employees to cash out without leaving the company can be a good retention strategy. “It’s a great way to say thank you to your employees,” she said. ”It’s a morale booster.”