Explained: A Unique Aspect of Startup Employee Pay

Natasha Mascarenhas
Anita Ramaswamy

July 27, 2022

31 min

Table of Contents

Hello and welcome back to Equity, a podcast about the business of startups, where we unpack the numbers and nuance behind the headlines.

This is our Wednesday show, where we niche down to a single topic, think about a question and unpack the rest. This week, Natasha and Anita asked:
When is a company taking internal valuation cuts a good thing?

Normally, when we hear about valuations going down, that’s a red flag that things aren’t going well at a given company or in the market at large. We wrote about Stripe’s 28% internal valuation cut earlier this month and as we listened to different reactions to the news, we noticed some people had an unexpected take — that this downward revision was actually a positive for the company’s employees.

That’s because the cut came from an internal 409A valuation appraisal, which is totally different from the investor-led valuations we normally hear reported on in the news. So we brought on two experts — Phil Haslettof EquityZen and Sumukh Sridharof AngelList — to help us unpack what this valuation cut actually means for startup employees and what else they need to know about their equity compensation heading into a market downturn.

For more information, you can also check out our TechCrunch+ piece about the matter, ‘Stripe’s new and lower internal valuation’.

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Equity drops every Monday at 7 a.m. PDT and Wednesday and Friday at 6 a.m. PDT, so subscribe to us on Apple Podcasts, Overcast, Spotifyand all the casts.

Natasha Mascarenhas

Senior Reporter
Natasha Mascarenhas was a senior reporter at TechCrunch covering early stage startups and venture capital trends.

View Bio

Anita Ramaswamy

Reporter, Crypto and Fintech
Anita Ramaswamy was a reporter at TechCrunch focused on crypto and fintech. She also co-hosted TechCrunch’s weekly crypto podcast, Chain Reaction, and co-authored its companion newsletter of the same name.

Before TechCrunch, Anita covered financial institutions for Business Insider. Prior to becoming a journalist, she worked as an investment banking analyst at Wells Fargo Securities.

You can reach her via email at anita(at)techcrunch(dot)com and follow her on Twitter at @anitaramaswamy.

Disclosure: Anita owns small amounts of equity in several companies.

The Show’s Schedule

Equity drops every Monday at 7 a.m. PDT and Wednesday and Friday at 6 a.m. PDT, so subscribe to us on Apple Podcasts, Overcast, Spotifyand all the casts.

This concludes our show for this week! Thank you for joining us, and we’ll see you next time for more insights into the world of startups and their financial landscapes.