This is our first installment in a series we’re referring to as Legends of the Deal, which will chronicle the life lessons of extraordinary achievers in the world of value building.
In this episode, you’ll discover how to:
Decide when to sell using the Rich vs. King framework.
Distinguish between your company’s values and its purpose (and why you need one more than the other).
Spot burnout before it’s obvious.
Evaluate all of your exit options.
Sell some of your shares in a secondary while still keeping control.
Get past your “freedom line.”
Leverage the box game to evaluate probabilities.
Protect your payout and avoid getting sued when sharing the proceeds of your exit.
Thank your employees when you sell.
Know when to hire a CEO (even when it means taking a demotion).
Work in flow state and find your ideal role inside your company.
More About Jason Cohen
Jason is a seasoned entrepreneur with a track record of successfully establishing four tech startups, each generating revenues in excess of $1 million annually, two reaching a billion-dollar valuation.
He is a cornerstone member and mentor at Capital Factory and has previously laid the foundations for both Smart Bear and IT WatchDogs.
This refers to the process where an employee earns rights to receive benefits from an employer’s contribution to the employee’s retirement plan account or stock option over a period of time.
Imagine you join a club at school, and the club gives out special badges to members who stay in the club for a whole year. You are told when you join that you will “earn” your badge bit by bit over the year. If you leave the club before the year ends, you don’t get to keep the badge.
Vesting in the business world is similar. When you start a new job, your company might offer you benefits like stock options (a chance to buy company stock at a special price) as a part of your compensation. But, just like the club badge, you earn this benefit over time, usually several years. This earning process is called “vesting.”
For example, if your company’s stock options have a four-year vesting schedule, you might earn the right to buy 1/4 of your total stock options each year. If you leave the company before the four years are up, you only get to keep the portion of your stock options that have vested, i.e., the part you have earned by staying with the company for that time.
So, vesting is like a reward that you fully earn or “vest” in over time as you stay with your company or fulfill other conditions.
Imagine you’re at a big yard sale where people are selling things they originally bought new.
Now, these items are not new anymore, they’ve been owned before, but they’re up for sale again. This yard sale is a bit like the “secondary market” for shares.
When a company first sells its shares to the public, it’s called an Initial Public Offering (IPO), and that’s like buying something brand new from a store. Once those shares are bought, they can be sold again by whoever owns them. This resale of shares is done on the secondary market.
A “secondary offering” happens when someone who already owns shares in a company, like an early investor or insider, decides to sell those shares to someone else after the IPO. They’re not new shares; they’re just changing hands. The money from this sale goes to the shareholder selling their shares, not to the company itself.
So, if you’re “selling your shares in a secondary,” it means you’re selling shares you own in a company to other investors on the secondary market, after the company has already had its initial sale of shares to the public.