Stock options are a popular way for startups to incentivize employees and remain competitive in the hiring process, as startups tend to have less cash than equity to use as bargaining chips. Traditionally, employee stock options at start-ups yield proceeds only after an initial public offering, as the options are often subject to provisions that restrict the right to sell or transfer ownership. Private company stock can also be difficult to sell as some investors may be dissuaded from purchasing stock from a company that is not listed on any public exchange. However, Google’s purchase of employee’s and early-stage investor’s ownership at LendingClub Corp. may portend a new trend in startup investment and an opportunity for private company stockholders to cash in prior to an IPO.
