Pre-IPO Liquidity: Selling Before the Bell

A generation ago, the company that made it to the public markets was young. In 1989 the average business going public was about six years old. By 2021 that had roughly doubled, to twelve. Deep pools of private capital now let a company raise enormous sums and grow for a decade or more without ever ringing the bell, and for the founders and early employees that patience carries a private cost. Most of their pay is stock. Their net worth climbs into the tens of millions on paper while their checking account sits right where it was.

It's a strange kind of rich. You can watch the number grow on a cap table and still scramble to cover the tax on options you just exercised, or lie awake knowing your job and your whole fortune are riding on the same single outcome. Pre-IPO liquidity is the set of honest tools for turning a slice of that paper into actual money while the company is still private.

The Concentration Nobody Would Advise

Strip away the excitement and a pre-IPO employee is holding a position no advisor would ever put a client into: a single, illiquid, privately held stock, worth most of their net worth, in the same company that signs their paycheck. If the business stumbles, the stock and the salary go down together, right when the person can least afford to lose either one. Diversification is the oldest advice in finance for a reason. It applies to founders too, even when the stock is the best thing they've ever owned.

This isn't an argument to sell everything. Concentration is also how fortunes get made in the first place, and the founder who dumps every share at the first opening usually kicks himself later. The argument is narrower, and harder to argue with: taking some off the table is just prudent, and there are structured ways to do it that don't signal a loss of faith or break the company's own rules.