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Business Insider
6 days ago
- Business
- Business Insider
How to cash out in Silicon Valley — without setting off alarms
In startup land, wanting a payout can look like betrayal. As exits remain elusive, early startup backers and founders are increasingly turning to the secondary market to get some cash back on their long-held shares. But cashing out—even just a sliver—can trigger board backlash, founder resentment, or worse: a signal to the market that the rocket ship might be losing steam. In this high-stakes environment, secondaries have become a necessary but delicate art form. "For seed funds, secondaries are a must these days. Whoever's not doing it is not keeping up to speed on the market," said Itamar Novick, the founder of Recursive Ventures. Novick wrote a pre-seed check into Deel in 2019. Over the years, as demand for shares of the $12 billion HR startup surged, he's cashed out portions of that investment by selling to other existing Deel investors who wanted to boost their stakes and to new investors looking for additional equity beyond a primary fundraise. (Novick clarified that all of the deals happened before Deel's legal battle with rival Rippling kicked off in March.) Despite the rising demand for investor returns, however, it's not open season for secondaries. Investors or founders hoping to get liquidity in a secondary sale have to carefully time, price, and brand the transaction, or risk sending catastrophic signals about the company's outlook to the market at large. "It's a fairly bad signal for other investors to know the Series A lead wants to sell their shares at, say, a $5 billion valuation," said Deedy Das, a principal at Menlo Ventures. "Why would later-stage growth investors want to buy in then? If the Series A lead doesn't believe in the growth, why should we?" That unspoken secondary market etiquette is at the center of VC's liquidity dilemma, Das said. Investors hoping to sell part of their stake might piss off their founders, to whom any sale attempt can seem like a bet against the company's future. Larger investors may not be able to sell any portion of their stakes without sending the markets reeling. And founders hoping for some liquidity through a secondary sale, facing the same market sentiment risks, might get blocked by their board of directors. It's blocking some investors from getting the returns they need in a stagnant exit market. Here's how investors and founders are navigating those dynamics to cash out without disturbing the capital waters. VC's backup exit route As VC exits through M&A and IPOs continue to stall, secondary deals are booming. The market for VC secondary investments into startups has surged to about $60 billion, up from $50 billion in the last quarter of 2024, per PitchBook. In the past year, investors have used secondary sales to scoop stakes in headline startups like OpenAI, SpaceX, Stripe, and Databricks. The action is highly concentrated among VC's biggest winners, however. On secondary market platform Hiive, the 20 startups facing the most demand accounted for 83% of secondary trading volume in the first quarter of the year. At the top tier, founders often care less about existing shareholders looking for liquidity, since they're swimming in investor demand, Das said. The trouble comes when an investor wants to sell part of their stake in a startup with a more modest growth rate, perhaps that's valued in the few billions of dollars — certainly an "upper class" valuation, but not quite part of venture's 1% — after holding those shares for the better part of a decade. "Then the founder might come back and tell you, 'We're going to the moon; we're going to be a $100 billion company. Do you not believe in us?' That's a more frequent scenario," Das said. For founders, it's personal, said Hinge Health CEO and cofounder Daniel Perez. "We all have egos, and this is our baby. It's our life's work. Even when a seed or Series A investor wants to take a little bit off the top, you're thinking to yourself, 'this is going to be the worst transaction you've ever made, because the stock's just going to keep going up.' That's what I initially thought," he said. But early-stage investors' push for returns has become easy to empathize with. Dave McClure, the founder of VC firm 500 Startups who now focuses on secondary market buys with his latest firm Practical Venture Capital, said that small pre-seed and seed stage funds, family offices, and individual investors are especially squeezed when companies stay private for longer. "That's fine for maybe institutional investors, but it's really a mismatch for everybody else that isn't," McClure said. "Maybe they were thinking they'd get their money back in seven to 10 years instead of 12 to 15 years. Now, they're like, I've got to send my kids to college, I want to buy a house, I've got a medical emergency. At that point, of course they want to get some money back." Perez said that, as Hinge Health waited out venture capital's exit drought, the physical therapy facilitated a tender offer in 2022 to allow early investors to get some returns on their stakes. The company had previously completed a $200 million secondary investment as part of its 2021 Series E fundraise, which brought some liquidity to Hinge Health's employees and early investors, as well as to Perez and his cofounder. Perez said employees with incentive stock options that had vested their shares for at least one year were eligible to participate, which was true of most of Hinge Health's employees at the time of the sale. The company attempted another secondary sale for its investors in the intervening years before its IPO this May, but ultimately ditched the efforts after confronting a gap in pricing expectations between the intended secondary buyer and Hinge Health's existing shareholders. As the secondary markets mature, those transactions may not feel as emotionally charged. investors told BI. Still, shareholders should loop founders into their secondary sale attempts as early as possible, and ideally have a prospective buyer lined up to make the company's job easier. If the founders are completely against the sale, immediate liquidity may not be worth souring the relationship. Novick said that when he's faced secondary deal backlash from founders in the past, he's backed off his plans entirely. Who gets to sell? For most startups, only early investors can sell any significant part of their stakes without triggering a negative market reaction. Investors who entered the company at its Series B or later, especially investors with board seats, are generally prepared to hold those stakes through an exit. Any failure to do that could spell trouble and hurt the company's ability to raise money in the future, Slow Ventures principal Yoni Rechtman said. "It's a good argument for not taking board seats. That could signal something worse," Rechtman said. He drew a connection to the public markets, where board directors selling shares can easily trigger a bigger stock selloff. "If this were a public company, how would it look?" More risks arise when a founder wants to sell part of their stake. A founder secondary sale can trigger the rest of the company's investors to try to sell shares, too, Novick said. Worse, it could hint to the market at large that the founder isn't bought into the startup's future growth. "When the founder sells secondaries, hunting season starts," Novick said. He noted that founders can't get away with selling more than a very small portion of their stakes: " Any signal where the founder is selling more than 10% of their holdings is going to be disastrous, and it's pretty likely to be blocked by the board." It's not uncommon for founders to be approved to sell shares for discreet goals, like to buy a house in the ever-expensive Bay Area, Rechtman said. But larger deals are a different story entirely. "When we see people selling between six figures and a couple of million dollars, it doesn't bother me at all, assuming the company's at a later stage, and especially if it's part of a primary transaction. They're basically clawing back the salary they deferred for the last several years working on the company," he said. "When we see people doing really big blocks, such that they're generationally wealthy no matter what happens, that's really uncomfortable." Startup employees are often left out of the liquidity conversation entirely. While founders may work to organize employee tenders late in the company's life to help get some cash back to their early joiners, employees generally aren't allowed to try to sell their shares except in deals facilitated by the company, with little say in how or when that sale happens. "The point of going to a startup is supposed to be that you work for a long time and eventually get rewarded in liquidity," Hinge Health's Perez said. "But now, employees aren't getting any money back." Structuring secondaries Early backers looking for returns should be careful of how much of their stake they sell at once. Novick and Rechtman said early investors can generally sell 10% to 30% of their stakes without raising any eyebrows. Rechtman said he'd consider sales up to 50% standard for small funds, while Novick said an investor kicking off half of their position would be a large and more unusual sale. Any more than a 50% stake sale could raise red flags for the market. Ideally, those sales happen as part of an equity fundraise that the company is already conducting. By pairing primary and secondary sales, the startup can send better signals to the market and handle changes to its cap table in one fell swoop. Investors told BI that the startup may charge a fee, which can fall either to the buying or selling shareholders, to cover the legal expenses and other work associated with executing a secondary sale "out of cycle." While most deals are enjoyed by tech's hottest private startups, with far less demand down the food chain, Rechtman sees those deals, and the conversations around secondary market demand accompanying them, as "cultural priming" for transactions down the line. "It was, for a long time, almost immoral or ugly to sell secondaries. It will take a long time for those cultural norms to change as the market norms do," he said.
Techday NZ
29-07-2025
- Business
- Techday NZ
Rippling's rapid growth driven by tailored HR tech for Australia
Australian companies expanding globally are driving growth in the HR technology sector, with workforce management platform Rippling reporting rapid momentum since its market entry in 2024. Rippling's investment in Australia has included growing its local team to over 80 employees, opening new offices in Sydney, and launching a suite of products tailored to meet the nation's distinct regulatory and operational needs. Team expansion The company's Australian operations have seen its headcount increase more than threefold in the past year, supported by active hiring across departments such as Marketing, Product Management, Compliance, Sales, Account Management, Solutions Consulting, Implementation, HR Advisory, and Payroll Operations. To house its expanding team, Rippling moved into a new Sydney office, designed for up to 100 staff and equipped with modern meeting and collaboration spaces. Key appointments in the region include Kellie Clenton as Product Lead for ANZ, Dan Shaw as Sales Director for Global Solutions APAC, and Andrew Rae as Head of SMB Sales. Customer growth and partnerships Rippling's Australia-based client list now features Sitemate, Omniscient Neurotechnology (O8t), AssuranceLab, Mentorloop, Cortical Labs and Liven. The company has also entered partnerships with local and regional players, including technology businesses such as Nium and Carta, HR consultancies and financial services firms including Loop Business Consulting and Zest, venture capital firms such as Square Peg, Blackbird and Investible, and organisations like Innovation Bay, the Australian Payroll Association, the Australian HR Institute, and Fintech Australia. Product localisation and launches To address Australian regulatory and business needs, Rippling has introduced a suite of new tools. These include a Workplace Gender Equality Agency (WGEA) pre-built report template to support compliance, a warehouse and inventory management solution aimed at improving employee onboarding and offboarding processes, and a custom training course builder for employee learning and development. In addition, the company launched App Studio, a no-code platform allowing businesses to create internal applications rapidly - which local company Liven cited as saving them more than 20 hours a week. Refining for local compliance "We're excited by how quickly Rippling's approach to workforce management has resonated with Australian businesses over the past year. From day one, we committed to localising our platform to meet Australia's unique requirements, and that investment is paying off, both for our clients and for the wider business. As we continue refining our product for this market and continue to expand our offering across APAC, we're confident that our emphasis on regional alignment, regulatory compliance, and on-the-ground expertise will keep driving success for our customers and partners alike." said Matt Loop, Vice President and Head of Asia at Rippling. User feedback Bradley Steinbach, People and Culture Manager at AssuranceLab, described the effect of Rippling on their operations: "Having all our information in one place has simplified compliance and enabled better decision-making. The consolidation into Rippling's system has been a huge timesaver, streamlining onboarding and payroll processes significantly. There's absolutely no way I would have been able to handle onboarding 18 people over two months without Rippling." Aaron Rau, Head of People and Culture at Liven, commented: "Rippling has been transformative for us. It's intuitive, efficient, and scalable. The platform's flexibility gives us confidence to expand and adapt as we grow, and it helps ensure we're compliant and operating efficiently. I couldn't see my team being as effective as they are without Rippling - it's a one-stop shop that just works." Future plans Rippling has indicated plans to further develop its rostering and payroll tools, as well as to introduce services tailored for new APAC markets as part of its regional expansion strategy. The company disclosed a capital raise of USD $450 million, resulting in a valuation of USD $16.8 billion, with reported annual revenue growth of over 30%. This expansion aligns with a broader trend where Australian enterprises seek external markets while facing local regulatory complexities, placing continued demand on HR technology solutions designed to streamline and centralise workforce management and compliance.
Time of India
14-07-2025
- Business
- Time of India
Elon Musk's AI startup xAI has made it mandatory for employees to install 'spy software' on their laptops
Representative image Elon Musk's AI startup xAI has reportedly implemented a controversial policy which requires all its employees to install a 'spyware software' on their laptops issued by the company. This move of the company which aims to enhance the security has started discussions about the privacy of the employees. As reported by Business Insider, the staff at xAI involved in the training of Grok has been asked to install a monitoring tool called Hubstaff, which will keep a track of the websites visited, apps used, mouse movements and more. Elon Musk's AI startup xAI ask employees to install 'spy software' on their laptops According to a report by Business Insider, Elon Musk's AI startup has asked the employees training Grok to download and install a workforce management system called Hubstaff. This monitoring toll is designed to keep track of employee activity including keystrokes, screen activity, and application usage. The company has not yet revealed the exact reason behind this new policy, but it is speculated to be a response to the highly competitive and sensitive nature of AI development, where intellectual property and data security are paramount. Initially, the directive applied to all employees, regardless of whether they had company-issued laptops, with a July 11 deadline for compliance. Later the company asked the employees using their personal devices to either purchase a new device using the xAI $50 per month tech stipend or create different profiles to separate their work from personal browsing. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like MacBook Air M4- now available at ₹83906* MacBook Air M4 Undo The company's HR team said that the new software would help the company in streamlining the work process and will also offer better insights into daily tutoring activities. 'This new tool serves to streamline work processes, provide clearer insights into daily tutoring activities, and ensure resources align with Human Data priorities," the company's human resources team said in a mass email to employees. However, the employees feel that the new monitoring tool is 'surveillance disguised as productivity'. The report further adds that apart from Hubstaff, xAI also uses HR manager Rippling to clock the hours of workers. Along with this, the company's in-house system Starfleet tracks the amount of time the tutors spent on each task. Elon Musk's xAI apologises for what 'happened on July 8 Meanwhile, it has been a tough time for xAI. The Elon Musk-owned company apologised 'for the horrific behaviour that many experienced' for 16 hours, starting on July 8. Through the official Grok account on X (formerly Twitter), the AI company said that 'the update was to provide helpful and truthful responses to users' but it spit out responses which 'contained extremist views.' xAI has also provided an explanation on what went wrong. It said that the incident stemmed from a July code update that activated deprecated instructions, causing Grok to reflect extremist views from X posts for 16 hours, a vulnerability not anticipated despite pre-release testing, as revealed by xAI's investigation. AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Irish Times
10-07-2025
- Business
- Irish Times
Judge says he was unfair to law firm in HR companies ‘spy' case
A High Court judge has said he was unfair to a law firm over the content of a letter it wrote denying any knowledge of particular surveillance allegedly carried out on the payroll manager at the centre of the business 'spy' affair. Mr Justice Brian Cregan said he had reflected on what he had said in relation to the letter written by Hayes LLP on behalf of Deel Inc. The US-headquartered HR software firm is being sued by rival Rippling, also US headquartered, who employed global payroll manager Keith O'Brien until his espionage activities on behalf of Deel were discovered. Mr O'Brien, of Balrothery, north Dublin, admitted being paid €5,500 a month by Deel and has been co-operating with Rippling having expressed regret for his 'participation in this espionage'. He is a defendant in the Rippling case against Deel and others but no reliefs are being sought against him. Mr O'Brien brought his own case alleging intimidation and harassment from surveillance of him and his family by what were initially only 'persons unknown' but later private investigation firms of Mark Murran, also known as Rock Investigations, and Cliona Woods of Gotham Services became the defendants. READ MORE They strongly deny any overt surveillance or claims of harassment and intimidation. During the hearing of applications related to Mr O'Brien's case, the court heard that before he brought legal proceedings his lawyers wrote to Hayes solicitors requesting the surveillance stop. Hayes responded with a letter saying its client (Deel) had 'no knowledge' of surveillance being carried out by two cars alleged to have followed and surveilled Mr O'Brien. One of the cars later turned out to be completely innocent while the other was driven by Mark Murran, the court heard. Mr Justice Cregan expressed concern that officers of the court (Hayes) had written a letter which was either a 'blatant lie or a misrepresentation'. It had also made him briefly question whether he could rely on another Hayes letter in another case he was dealing with but he did accept that letter. Paul Gardiner SC, instructed by Hayes for Deel, objected to the judge's description in a case in which fair procedures had yet to be gone through. He said it was unfair to Hayes. Mr Gardiner also said the letter was true at the time and while it turned out to be incorrect because discreet surveillance was commissioned by Deel, when written it was believed to be correct. The judge said he wanted an explanation from Hayes via an affidavit. On Thursday, Michael Cush SC said he was representing Hayes in relation to the judge's request and he was looking for the matter to be dealt with as soon as possible. Mr Justice Cregan said Mr Cush's application was very timely because he had been reflecting on this matter and Mr Gardiner's comments about him being unfair. He said he was concerned about the Hayes letter but it was written on instructions from the client and it was an issue for Deel rather than Hayes. 'So I had in fact been unfair,' he said. He had been mulling over the matter and was considering asking the court registrar to write to Hayes as to whether the firm could write another letter 'and that would be a solution'. Mr Cush said that was very gracious of the judge but he would first have to take instructions. Hayes was concerned at the publicity the judge's comment attracted and they were hopeful that showing the letter was written on instructions would also attract some publicity. The judge said he would be prepared to deal with the matter on Friday. He was concerned about the administration of justice aspect of the matter (as Mr O'Brien will be a witness in the Rippling case). He felt the matter might be dealt with by a letter from Hayes correcting the record but he would leave that to be dealt with on Friday.
BreakingNews.ie
04-07-2025
- Business
- BreakingNews.ie
Judge wants explanation from solicitors over 'no knowledge' letter in spy case
A High Court judge has said he wants an explanation over a letter from the solicitors for HR firm Deel Inc, saying their client had "no knowledge" of the following by private investigators of a payroll manager at the centre of a rival business's "spy" affair. Mr Justice Brian Cregan said he was not going to join Deel as either a defendant or notice party in proceedings being brought by Keith O'Brien, the man who was allegedly paid €5,500 a month to pass on trade secrets of his former employer, HR software firm Rippling, to rival Deel. Rippling is now suing Deel and others, including Mr O'Brien, over the matter. Advertisement The judge said he would not join Deel in Mr O'Brien's separate case alleging harassment and surveillance because doing so, of the court's own motion, was an exceptional jurisdiction. It was also unfair to the O'Brien side, who did not want Deel added anyway, and because of the separate Rippling case against Deel. Mr O'Brien's case is against two private investigators which he claims have been involved in harassment of him and his family, including one who allegedly followed him by car to various locations and photographed his children playing in their garden. The investigators, Mark Murran, also known as Rock Investigations, and Cliona Woods of Gotham Services, strongly deny any overt surveillance or claims of harassment and intimidation. Advertisement That case was back before Mr Justice Cregan on Friday, when the judge ruled out joining Deel but said his main outstanding concern was a pre-litigation letter written by Deel's solicitors, Hayes LLP, in reply to a call from Mr O'Brien's solicitor to desist from the alleged surveillance/harassment. In that letter, Hayes stated their client had no knowledge of the cars allegedly following Mr O'Brien. On Tuesday, the judge described the Hayes letter as either a "blatant lie or a misrepresentation" because it was later admitted as being incorrect, because Deel said it had organised "discreet" but not overt surveillance on Mr O'Brien. On Friday, he said: "The question from my point of view is that this is a letter from reputable solicitors who are officers of the court and it is blatantly wrong". Advertisement He said Deel's barrister, Paul Gardiner SC, instructed by Hayes, indicated he (the judge) should not have said it was a lie or misrepresentation, but it seemed to the judge that it is still an issue for the court and should be properly addressed. He said because of that letter, earlier this week in another case in which Hayes were representatives, he had a question as to whether he could rely on it, although he did do so in that case. He believed the next step was for Hayes to swear an affidavit as to how that replying letter to the O'Brien side was written. Mr Gardiner said the letter was true at the time, and while it turned out to be incorrect because discreet surveillance was commissioned by Deel, when written, it was believed to be correct. He felt that what the court might be doing is "putting a wedge" between Deel and its representation. Mr Gardiner also believed the judge was being unfair to both Hayes and Deel in circumstances where fair procedures and due process have yet to take place and where the judge's words were being widely reported. Advertisement If the court is to have a separate inquiry into this letter, it should at least not take place until the O'Brien harassment proceedings have concluded which may well find there was no harassment, he said. Mr Justice Cregan said he would give two weeks for Mr Gardiner to take instructions and consider the matter more fully, and he said his concerns may be assuaged if it is explained in an affidavit. The judge also granted consent orders, sought by Mr Murran and Ms Woods, that Mr O'Brien preserve any information, including on CCTV, dashcam and phone, relating to the allegations against them. He also continued the injunctions restraining further surveillance.
