TC&MN #4 The Tech Meltdown Could Be Your Opportunity

This meltdown can be a great thing for you!

Don’t let big media cloud your lens as to what is really going on in Tech.

You are an investor of your time and talent in great technology companies. To do this, you need to look past the doom and gloom of the media and find the truth. Look beyond the headlines at the data.

Hard times create great companies.

Look at the past for answers. Some incredible companies emerged from the bust of 2001 and the long dip after 2008. When you look at the data of the companies founded in both events, you will see some familiar names that are part of our daily life today.

All of these companies demonstrate the resilience and innovation of the tech industry, even in tough times.

Post Dot Com Bust:

• WordPress (2003): Initially launched as a blogging platform, WordPress evolved into a powerful content management system (CMS) used by millions of websites worldwide.

• LinkedIn (2003): Founded by Reid Hoffman, LinkedIn became the go-to platform for professional networking and career development.

• Facebook (2004): Founded by Mark Zuckerberg while attending Harvard University, Facebook initially grew as a social networking site for college students. However, it quickly expanded to become a global phenomenon.

• YouTube (2005): Founded by Steve Chen, Chad Hurley, and Jawed Karim, YouTube revolutionized online video sharing and has become a major source of entertainment and information.

The Great Recession birthed even more:

• Uber (2009): Founded by Travis Kalanick and Garrett Camp, Uber disrupted the traditional taxi industry with its ridesharing app.

• Slack (2009): Founded by Stewart Butterfield and Cal Henderson, Slack emerged as a popular workplace communication tool, replacing email for many teams.

• Venmo (2009): Founded by Andrew Kortina and Iqram Magdon-Ismail, Venmo offered a convenient way to transfer money between friends and family.

• Square (2009): Founded by Jack Dorsey and Jim McKelvey, Square provided mobile payment processing solutions for small businesses.

• WhatsApp (2009): Founded by Jan Koum and Brian Acton, WhatsApp became a popular mobile messaging app used by billions of people worldwide.

• Stripe (2010): Founded by Patrick Collison and John Collison, Stripe provided payment processing solutions for online businesses.

• Instagram (2010): Founded by Kevin Systrom and Mike Krieger, Instagram quickly became a popular platform for sharing photos and videos.

There are opportunities out there; you just need to look for them. 

I went to work for Splunk in May of 2011 after they had gone through a round of layoffs ~4 months earlier. Some in my circle were calling this a risky move. However, I had been doing due diligence on tech companies to invest my time for the previous six months. Splunk had all the qualities of a great product, growth, and leadership to weather the storm and thrive in it.

Splunk IPOed on April 19th 2012, less than a year later with a 108% increase on the first day.

Now is the time to look at the companies that are doing well and poised for great things after this economic dip. Our economy runs in cycles and when you have seen these cycles play out year over year, you learn to be patient and give it time. Stay focused and keep looking while others are not.

As an investor, you must look beyond the headlines and follow the data.

32 🎙️ Equity In Action: Big Tech, Entrepreneurship, and Portfolio Building. ← Click Here to Listen!

In our latest episode, LaSean Smith shares his remarkable journey, starting from his experience in large tech companies to venturing out and establishing his own micro private equity company.

He candidly discusses the challenges and benefits of both paths, revealing sage advice that can help you carve your own path to success. 

Secondary Market Liquidity Guide

Liquidity is critical when working for a pre-IPO start up.

Sometimes you have sacrificed a larger salary, time, and opportunity to come here, so being able to de-risk your situation and take some money off the table is important. In the 90s and early 2000s, there have not been many options for early liquidity.

However, in the last few years, companies have been founded that will broker transactions between early-stage employees and buyers of those shares.

Keep in mind that your stock agreement will dictate how to handle private sales, and more companies are promoting early liquidity for early-stage employees.

Without further ado, here are some of the providers of secondary markets:

Forge Global Established in 2014 - Forge is founded on making the transactions for tech employees easy to sell vested shares in private companies.

Forge Global acquired Sharespost in May of 2020 and is arguably one of the larger players out there, if not the largest. Forge Global state they have a $100,000 transaction minimum but are willing to take offers like they are negotiable. You can learn more here.

Personally, I have a login for Forge Global and use it to keep my eye on private tech companies. It will provide you with an idea of the valuation and prices shares are trading at today.

Use sources like this to understand the value of private company equity if you can.

Equity Zen Founded in 2013, Equity Zen has been around for almost nine years and boasts 260,000 users around the world that are buying and selling private equity stock.

Their platform is really easy to navigate and they have an excellent blog that provides a lot of information on private tech company due diligence.

Here is a great article on why secondary market liquidity is important to tech employees.

Equity Zen has a very straightforward process that walks shareholders through the steps to verify if there are buyers for your shares. They have great testimonials as well.

Use these resources to evaluate your current holding or to look at perspective companies where you are interviewing.

When you do the research then you can remove the emotion.

Think like an investor with your time and talent.

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Disclaimer: This newsletter is for informational purposes only and does not constitute financial or career advice. Always consult with qualified professionals before making any decisions based on the information provided.