Quid, a smart liquidity tool for private stock shareholders, solves a common pain point for employees at high-growth startups: the inability to afford extremely expensive option exercise costs before an IPO. Before Quid, if employees wanted to exercise equity before an IPO, there were limited options for shareholders which meant they would likely have to absorb large tax payments and exercise fees out of pocket. This problem has plagued shareholders for decades and forced many private company employees to wait for an IPO to exercise. Quid’s shareholder-first solution allows employees to borrow against their private stock value without having to transfer or sell shares. This approach allows Quid borrowers access to the capital they need while having the ability to benefit from any share appreciation. Quid was developed by Quid Capital Group which launched its first fund in 2017, as a pioneer among a growing sector of non-recourse loan products and has since deployed well over 100M of loans to shareholders at over 25 companies including Unity, Palantir, Uber, C3, Affirm, and more. To learn more about Quid, visit www.getquid.com.
Historically, shareholders have limited choices in exercising private stock. The problem is further exacerbated by rocketing internal 409a valuations which make exercising increasingly expensive leading up to an IPO. With an average annual salary of below $200k1, many tech employees cannot afford their exercise costs which can run into the millions, and even C-suite executives may be challenged to come up with the cash required to exercise their options. Further compounding this problem is the lack of alternatives for shareholders. Other options like secondary market sales, not only can result in sub-optimal tax consequences and broker fees, but they do not allow shareholders to participate in any potential growth of their stock. Often, these practices also violate share transfer policies mandated by the company. Quid addresses these fundamental problems by providing the capital and liquidity education, in advance of approaching a liquidity event. In contrast with traditional loans secured by personal assets, Quid’s loans are generally collateralized by private stock alone. Loan repayment is then triggered when the company has a liquidity event, such as an initial public offering or sale.
An early-stage employee at the fin-tech company Affirm shared how they benefited from Quid’s loan model, “Quid allowed me to exercise my options prior to IPO, setting me up to capitalize on a very favorable exit. I exercised over $1M in options and saved more than two times that amount. As a shareholder, I look at Quid’s loan offering as a wealth strategy, not solely a liquidity option.”
Quid Capital Group is coming off its highest performing quarter in Q4. In November, the company announced its second fund which raised over $320M. The company’s backers include funds managed by Oaktree Capital Management, L.P. (“Oaktree”), Davidson Kempner Capital Management LP (“Davidson Kempner”) and a leading Ivy League endowment. “Quid’s solution seeks to optimize tax, option exercise, and liquidity planning for our customers. We have seen regular, programmatic, shareholder liquidity become a retention requirement for any top of the line late-stage company,” said Josh Berman, co-founder of Quid Capital Group.
Primary Quid Benefits:
- Quid allows employees and shareholders to access capital while retaining the potential for growth upside of shares
- No out-of-pocket fees for Quid’s program
- Quid generally requires no personal liability
- Quid transactions can take three days, where as an equity sale may take months
About Quid Capital Group
Quid Capital Group was established by former startup founders who believe that equity compensation is broken. Quid offers a new kind of loan on pre-IPO equity. There is generally no personal liability on the loan, and it is intended to be fully compliant with company policy, allowing employees and shareholders to enjoy cash today without any out-of-pocket expenses. The loan is repaid when the company has an IPO, sale or other liquidity event, and the employees can retain upside in their equity through the liquidity event. Quid Capital Group is backed by Oaktree, Davidson Kempner, and a leading Ivy League Endowment. Learn more at getquid.com.