As you point out, if Figma can build a growing, profitable business, there is no reason they can't IPO at some point. But still, this shows how even the purpose of an IPO these days is completely opposite from the original intention. I.e. the original intention was to get access to public market funds to grow a business. Now it's usually just a method of "exit" to let retail investors take the lion's share of the risk - one only need to look at 95%+ of the past few years' SPAC deals to see how much of a "pump and dump" the market has become.
The majority of those affected negatively by this are not the founders, but the employees. Many of them may have turned down FAANG positions that come with predictable liquid RSUs. Some may have kids (in fact, I know someone at Figma who had a kid in the past year).
Liquidity's not necessarily about opportunistically passing on risk...sometimes it's just about making a competitive living relative to being at a public company.
And having been in that position several times, I definitely don't blame them! Employees also have the much tougher constraints that they can't diversify their employment like VCs can diversify their investments.
But still, it's the same dynamic that people want to get rich, and the downstream consequences be damned.
Look, it sucks, I get that. I was an employee at a successful startup that did end up going public and made me a bunch of money. But I also worked at three other startups that didn't go anywhere and my options/stock ended up being worthless. I also worked at a "boring" public company with equity comp that amounted to a pretty small (but helpful!) quarterly bonus.
I accepted each of those jobs knowing what I was getting into, and knowing that I probably wouldn't see any kind of big payday (the one where I did was life-changing, but if that hadn't happened, I'd still be fine, financially). That's the nature of the beast. It's disappointing when it doesn't work out, but don't play the "some of them have kids" card: people need to plan their finances based on normal, expected outcomes, not on the moonshot.
And regardless, Figma still seems like a great company, with great products. Employees will still likely do really well, whether through a different acquisition or by going public. They'll just have to wait longer.
Well yes there are typically many more employees than there are founders. Despite this, founders probably missed out on orders of magnitude more money than all of the employees combined.
Founders and employees would be totally OK with staying private, if the board would ever permit issuing a dividend. That's the "normal" way to have an "exit" (i.e. return profits to shareholders) without a public offering. The purpose of delaying issuing a dividend is to reinvest profits / additional fundraising for growth, but that growth should still result in a dividend in the future, just a larger one if the investment in growth succeeds.
Instead, founders and employees are encouraged to look forward to an IPO precisely because somehow we've come to believe that it's sinful for a company to issue a dividend, as if doing so means giving up on the idea that further growth is possible, when really it's only an acknowledgement of the fact that (a) there's a healthy rate of growth, (b) that healthy rate of growth costs $X, (c) if the company has $Y cash >> $X growth cost, then the healthy thing to do is to issue a dividend (so that shareholders can invest the excess into companies that are currently better recipients), rather than attempting to force growth faster than the company can support.
If the general understanding was that the founders (well, board) weren't chasing an acquisition or IPO, this might be a good deal for employees. Of course, if the company is VC-backed (and the founders don't have majority control anymore), the VCs probably wouldn't go for this sort of thing.
I do actually wonder if the current trend of consolidation is driven in part by the standard VC-backed startup formula. Getting acquired is usually a lot easier than going public. Instead of startups fueling long-term competition, they just end up getting gobbled up by larger players most of the time, fueling consolidation and monopolistic behavior.
And as someone who went through an acquisition exit in a just-shy-of-unicorn startup by a very big dog, yes, everyone's/VC's aversion to IPOs is definitely making it easier for said big dog companies to acquire people who in the past would have been shoe-ins for excellent IPOs.
Most businesses in technology are nothing like the VC-funded, exit-oriented, and/or hyper-growth culture would have you think. Yet it seems like the glitz of a great IPO or being able to shell out for a $200 million annual corporate event blinds many to the reality of most businesses.
I have wondered how much of this naïveté contributes to the failure rate of technology startups.
I’m on my second business and I intend for it to be my last, though time will tell. The key thing I’ve learned is that hyper-growth, IPOs, and VCs aren’t really good for anyone other than the equity holders. Once you start selling ownership in your business, your customers are no longer your first North Star.
IPOs and huge sales far above the liquidation preference is the only way any of the employees would see any of that money.
[Off topic] That is some throwaway account with 60k+ karma and almost 7 years in age.
A "proper" startup does indeed include an exit as that's the point where they give a return on investment to their VC's. That is the startup game, use the VC money to accelerate growth, then exit/go public.
Not saying I like it, but once you take the VC money that is the game you play.
Regarding startups, I just did google "define: startup" and in the dictionary definition there has no VC and no exit.
Sometimes more than half of your expected compensation at a startup is in equity upside, either from an IPO or acquisition.
If that is to no longer be the expectation, then hiring at startups will be _much_ more challenging because startups cannot generally afford the salaries or benefits that larger companies can offer.
