For many employees at high-growth companies, equity can represent one of their most valuable assets, but understanding what that equity is worth, when to exercise it, or how to access liquidity can be complex. Option types, exercise windows, transfer restrictions, taxes, and shifting private-market valuations all play a role in determining the best path forward.
In this interview, Eqvista speaks with Bryce Emo, founder of Sidecar Finance, about the realities of navigating private-company equity and secondary-market transactions. Drawing on his experience as a technology operator and his own experience managing stock options, Bryce explains why Sidecar was created to bring greater education, transparency, and patience to the private-market equity process. He also shares insights into the most common mistakes shareholders make, how employees can prepare for liquidity events, and the factors that should guide decisions around private sales, tender offers, loans, and structured financing.
Bryce, could you walk us through your background and the moment or experience that led you to launch Sidecar Finance?
I spent my career as a head of sales at tech companies (MySpace, Basis & 4C) and spent over a decade managing my own option grants, option exercise and liquidity searches. It took me years to learn what we are able to teach private company executives in 30 minutes. When I got into the secondary markets 7 years ago, at Quid, I felt I was bringing a lot of value to clients and received tremendous appreciation from the shareholders I spoke & shared my learnings with. I wanted to continue this work without being beholden to one type of solution so I started Sidecar Finance to help buyers and sellers in the secondary markets transact.
What problem was Sidecar Finance created to solve, and what gap did you see in the private-market equity experience for shareholders?
When I looked at the marketplace there were 3 key elements missing. 1.) The voice of a former tech operator who has made material financial decisions about their personal equity grants, 2.) Education about how equity grants and the secondary markets function, 3.) The patience to educate clients and the joy that comes from connecting with executives & funds across longer sales cycles.
I started Sidecar to bring these elements to the marketplace.
How do you help employees understand the real value of their equity, and what are the most common mistakes they make when evaluating options or shares?
First we start by understanding the compilation of a person’s equity plan and situation by asking questions and listening. Some of the questions include: Do they have options or stock? How many and what kind (ISO, NSO, Common and Preferred, RSUs)? How many have vested? Are there restrictions around transferability? How much do they need to purchase the options?
We then leverage multiple platforms such as (Caplight, Zanbato, PMInsights, Notice.co, etc) to show them where bids, asks and trades have been happening historically weeks, quarters, years.
Most employees wait too long to think about their options. What signals tell you that a shareholder needs to act now, and what does leaving it too late actually cost them in practice?
The 3 triggers that tell me a client needs to act quickly are 1.) They have left the company and they have days or weeks to exercise as the process can take months, 2.) The company is on the brink of raising capital which might significantly increase the 409A, 3.) The shareholder has taxes due in the next 6 months.
They are actively in the market for a house, have a child going to school in the coming months, and are planning a wedding.
We recommend people reach out to us 6 months prior to actually needing liquidity so we can help them 1.) get up to speed on their equity situation, 2.) monitor and really feel the market (are there a lot of buyers, a few, none, how much are buyers looking to buy, are there a lot or a few sellers, are prices changing and if so is it because buyers are hitting the offer or sellers are hitting the bid, etc).
How do you compare the main pathways available to shareholders, such as private sale, loan, or structured finance? What determines which one fits a shareholder’s situation, and where do people tend to get that choice wrong?
We will sit with the shareholder and place their equity grant (ISOs, NSOs, Shares, RSUs, etc) into a model which directly compares Selling in the private market, selling in a tender, structured financing, traditional financing. Shareholders who need liquidity but are at a hyper growth company may end up passing on structured financing due to the perceived high cost of financing. However, the opportunity cost of selling shares at a discount to a recent round or future valuation, at times can be a far greater cost. Others want to leverage financing to exercise their options to try and optimize for tax but as they meet with their accountant they learn the cost of the financing negates any tax optimization. 50%+ of our business is working with groups who are looking to purchase shares. Often they come to us with SPV opportunities they are considering but as we help them explore the marketplace they learn the SPV they are being shown by another group has far too many fees and is much more expensive than they realized.
What role does equity education play in preventing confusion, frustration, and costly mistakes inside high-growth companies?
It’s critical and very few companies offer it. Employees are often flying blind with regards to their largest equity position and possibly their greatest wealth driver. By far the 2 biggest mistakes employees make are 1.) properly valuing their common shares when taking a role or negotiating an additional stock grant. Investors receive preferred shares which generally trade at a premium to common shares which employees have options to purchase. 2.) Having a plan for option exercise prior to leaving a company and many/most have only 90 days to purchase options prior to leaving a company. We offer equity education sessions and our materials gratis to hyper growth companies to help their employees get up to speed.
How do you balance advising shareholders directly while also working with companies that want to educate and support their teams?
Our aim is for this to be a win/win situation for companies and their employees. The companies are able to offload equity education. The shareholder better understands the value of their equity and how it functions so they have line of sight to the financial reward they can help unlock by performing their role at a high level. Equity is often a very awkward and sensitive topic for companies and employees to discuss and it also varies drastically by role, tenure and hire date so it’s helpful to have an intermediary.
Secondary transactions in private markets are often described as opaque and relationship-driven. What does it actually take to get a deal done, and what do most people on the outside not understand about how this market really functions?
The market is rather small. Though there are hundreds of brokers many of them share order flow and the secondary market inner-broker exchanges such as Caplight, Nasdaq, Augment, Zanbato, PMInsights, etc help reduce data asymmetry. It’s critical to find a broker you like and trust. Many times we see a seller try to work with 5+ brokers and they harm themselves by 1.) creating the perception among buyers that there is more inventory in the market than truly exists, 2.) When brokers see a person with the same size and price pop up they question the seller’s intention to actually follow through on a deal so they stop pushing the market for them.
The profile of someone seeking private liquidity has changed. Five years ago this was a niche. What’s shifted in how employees think about their equity, and where are the attitudes still stuck in the past?
The massive increase in the number of unicorn companies and the amount of media attention has created an ecosystem of buyers who are trading shares in the secondary market. There are employees of these companies who are on to their second or third unicorn company. Some have made money, some have watched paper wealth evaporate. Those stories have become commonplace water cooler talk so this generation of employees is often educating one another. What we have learned is that down markets are often a vacuum and it can be very hard to get any liquidity. Selling on the way up can be the only way to get liquidity. Hyper growth + illiquid markets make controlling fear and greed even more difficult than in the public markets. The people who have been around the tech space for 10 years get that and are trying to be more disciplined. Wealth advisors are also pushing their clients to put a plan together with life goals & retirement targets. They are then pressing their clients to sell shares to achieve those goals and milestones.
Tax treatment, ROFR clauses, option expiry windows, these can quietly destroy the value of a transaction. Which of these catches shareholders most off guard, and how do you catch it before it becomes a problem?
ROFR is not bad for shareholders as they still get liquidity at the same share price & volume. Transfer restrictions are brutal as it leaves the client with very few options and an extremely small % of market participants to work with. Expiry windows are the one every shareholder should kick themselves for if they aren’t aware of them. It’s easily avoidable and a shame when we see employees leave empty handed after pouring years of their lives into a company.
Founders tend to have complicated feelings about secondary sales by their own team. What do they get wrong about it, and how should they be thinking about liquidity for their people without worrying it signals a lack of conviction?
Unfortunately many of those founders have double standards and are taking liquidity either through direct sales or structured transactions while expecting their employees to live on a meager salary. There is a fallacy that it keeps the employees hungry. I think it makes the employees frustrated and resentful. We see employees are exhausted and cash broke leave companies to “take a paycheck” at companies like Amazon, Google, Microsoft, etc. Ultimately I think not allowing employees to sell shares is bad for culture, talent retention and value maximization for shareholders.
Looking ahead, what changes do you expect in the private liquidity market, and where do you think the biggest opportunities will be for shareholders and companies?
Companies have made strides in their thinking around tender programs. This is healthy for shareholders and controls the liquidity transaction. I think we will see the democratization of the secondary markets in the coming years. Groups that are setting up SPVs and allowing accredited investors access, with as little as a $5,000 check. As legislation evolves around investing in private companies via 401K we could see a new pool of capital and investors come to the secondary markets. The biggest issue is visibility into and tracking changes to the chain of custody of private company shares across investment vehicles such as SPVs. The ecosystem will get rocked as bad actors and sloppy math are revealed. The secondary market absolutely, positively MUST come up with a solution for tracking chain of custody and authenticating shares & ownership.
