Ripple CTO David Schwartz Weighs in on IPOs and Employee Equity

The IPO as an Exit Strategy

The conversation initially revolved around the notion that many tech companies going public have underperformed, with IPOs often viewed as a "cash exit" for early stakeholders. Schwartz, a veteran in the startup ecosystem and one of the original architects of the XRP Ledger, elaborated on the significance of IPOs for developers and early employees. He emphasized that while an IPO can be a lucrative exit, it is not the only way for employees to realize the value of their shares.

Alternative Paths to Liquidity

Schwartz highlighted that there are other avenues for employees to convert their equity into cash, even if an IPO does not materialize. These include selling shares on the secondary market, participating in share buybacks or tender offers, and receiving dividends. He pointed out that if the company performs well and management is supportive, these methods can be effective in providing liquidity to employees.

However, Schwartz also acknowledged that when a company cannot provide enough liquidity through these means, an IPO becomes a more attractive option. He noted that early investors, in particular, may become anxious if they feel their exit opportunities are limited, making the timing of an IPO crucial.