Unicorn Fund

An idea that’s been stirring around in my noodle for a bit: a fund for vested, late-stage startup common stock holders (i.e. employees) to contribute (i.e. invest) their shares in exchange for a percentage stake in said fund.

Why would an employee consider such an investment? To tap into your drive. To be a founder. To de-risk your position. As a late-stage startup employee, one of the thrills of joining such a company is the promise of a huge IPO. Rapid riches. But if your company doesn’t exit according to terms favorable to your common stock rights, you may walk away with…a cool story? If you’re lucky. If.

Hence the impetus for the idea of the Unicorn Fund. Legalities and other mechanics aside for the moment, the concept for this “Unicorn Fund” is to bring together the non-founder employees of various unicorn companies for them to be able to commit their vested shares to a fund. The fund would pay the fair market price for the shares (i.e. the price of the shares as valued when the options were assigned to the employee) once the employee had vested and exercised the options. Those options would be handed over and become held by the Unicorn Fund. In exchange the employee/former holder would be granted a percentage stake in the fund. She would become a Limited Partner investor in the Unicorn Venture Fund.

The target LP “investor” would be employees of unicorn companies: the Airbnb’s, Ubers, Snapchats, SpaceX, Pinterest, Dropbox, Spotify, Lyfts, Zenefits, CreditKarmas, CloudFlare, DocuSign, Oktas, etc. of the world. Employees of such companies would be able to (potentially) realize the upsides of their many peers successful exits while mitigating against the odds that their one single bet on their own employer might not pan out. These target “investors” would be targets for the same reason that their companies are unicorns: more people than not believe the companies themselves are going to succeed because of their amazingly disruptive product, business model, leadership, market share, fill in the blank. Statistically – as a matter of reality – some will fail to achieve expectations.

Payouts would be issued based on a complex formula of percentages, weighting, time, etc. (Details, details…yawn.)

But, again, why? I mean, who would want to do this? More pointedly, who would allow this? Surely the boards of these companies wouldn’t allow it. And the execs wouldn’t go for that either, right? Maybe. Maybe not. One way of framing it to them, though, might be as a potential retention tool. If, as an exec, your employees could get a piece of multiple companies only AFTER they are vested in yours, they may be more likely to look past some of the warts of your company. Another upside: accelerated maturation. It could encourage them to think bigger picture and longer term and may even help scaffold more sophisticated ways of thinking about ______ (insert your Silicon Valley vertical here).


The more frequently I spout this idea to Unicorn Company workers, the more nodding heads I see. People dig it. And the more people dig it, the more I realize that what they’re digging is less about de-risking their position and more about being a part of something bigger than their day-to-day.

Last year, at a SaaS conference in San Francisco, I was walking the floor with a colleague. “Look at all this. What are we doing? What are all these people doing? They’re selling software?! And not even software that’s changing anybody’s life! All this brain power – We could all be doing so much more with our lives.” It was an noteworthy moment of clarity for this person. And it was a moment that has been conspicuously filed in my memory. Not to be dismissive of an entire industry, but many of the worker bees at these sexy, shiny companies aren’t necessarily doing sexy, shiny things. The work isn’t as glamorous as the sparkling logos. And that’s okay. As Will Hunting would say, “There’s honor in laying bricks, that’s someone’s home I’m building“. Whatever you’re doing, do it well. That’s something to be proud of. But it’s not quite something bigger than oneself in that sense of soul-filling purpose.

The Unicorn Fund concept is a good idea. Where it is potentially more powerful, though, is as an organizing concept: bringing these employees together to network, make connection, get exposure to other verticals, business models, management techniques, operational cadences, ideas…to get exposure to the rich network of human capital that is exactly the bedrock on which the well-heeled are able to build their fortunes. The Unicorn Fund is, conceptually, as much about building a valuable network as it is about “de-risking” an employees position. A rich network may not be soul-filling either. But it is a launching pad, a door opener, to be able to reach and feel with the tendrils of your spirit.

While admittedly not altruistic in the same way as the Skoll Foundation or Oprah, The Unicorn Fund concept taps into the larger than life urge to be working towards or for something bigger than ourselves. And while a company, company mission, and our coworkers may technically be that bigger something, many folks don’t experience their work that way.


Image here: https://flic.kr/p/ekheuA

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