Many employees at high-growth startups face a frustrating dilemma: they're granted stock options that could be worth millions, but lack the cash to exercise them. This "pre-wealth liquidity" problem leads to more than half of employee stock options going unexercised, according to the Financial Times. The issue becomes particularly acute at companies that delay IPOs for years, leaving employees with paper wealth they can't access.

A Financial Bridge for Startup Employees

One way to address this could be through a specialized lending service that provides employees with upfront capital to exercise their stock options. The loans would be structured with repayment tied to future liquidity events like IPOs or acquisitions, ensuring employees only pay back when they actually gain access to their shares' value. The service could use the shares themselves as collateral, creating alignment between all parties - the service only profits if the employee's shares become valuable.

Key features might include:

• Contingent repayment that only triggers during liquidity events
• Potential use of innovative financing mechanisms like flash loans for speed
• Partnerships with startups to integrate the service into compensation packages

Aligning Stakeholder Interests

The service would create value for multiple groups. Employees gain access to their potential wealth without upfront cash. Startups benefit from more engaged employees who have real skin in the game. Investors providing the loan capital get exposure to high-growth companies through a novel channel. The service itself could generate revenue through various models, such as taking a percentage of the eventual gains or negotiating equity stakes from participating companies.

Path to Implementation

A practical approach might begin with a simple MVP offering basic loans to employees at a few select startups. This would allow testing of core assumptions about demand and repayment mechanics. If successful, the service could evolve into a marketplace connecting investors with employee borrowers, potentially incorporating more sophisticated features like flash loans. Early focus would be on tech startups with clear paths to liquidity, where both the need and potential returns are greatest.

While similar services exist in the private equity space, this approach could differentiate itself through faster execution, deeper tech industry integration, and more flexible terms that keep employees as full equity owners rather than partial sellers.