Why Joe financed his stock options exercise after leaving Confluent
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The COVID-19 pandemic hit some companies hard. In August 2020, Confluent downsized their education department and Joe, a technical trainer, was laid off.
Joe wasn’t unemployed for long, but in the interim, he found himself wrestling with a question: how could he afford to buy his stock options? Now that he was no longer employed by Confluent, he only had 90 days to exercise his options before he lost them.
Joe could’ve liquified his assets in order to exercise, but that was a risk he wasn’t willing to take — especially when he was still looking for his next role. Thankfully, Joe was able to cover the cost with non-recourse financing from Secfi just in time before Confluent IPOed.
When Joe joined Confluent, he didn’t have much experience with equity. “I don’t know very much about finance — in my career, I teach about software and the cloud — so I rely on experts to help me assess my options,” he said.
When Confluent made the offer, they gave him quite a bit of education and information about his equity. “When Confluent extended the offer, they spent a lot of time talking through the equity with me,” he said. “They talked about the potential upside, what was involved, and when it might make sense to exercise.”
Even when Joe was laid off, the team at Confluent had his back. They reminded him that he had 90 days to exercise his options, explained how he might be able to do so, and suggested he look into financing options.
Although Joe understood he only had 90 days to buy his stock options, coming up with a significant amount of cash in that time was tough. Although Joe could technically exercise on his own, he would’ve had to liquefy a substantial portion of his assets. He didn’t want to do that, especially since he wasn’t sure about the future of his career. “I wasn’t willing to liquify those assets when I didn’t know what my next position would be,” he said.
Joe could’ve left behind the equity, but he felt strongly that holding on to the shares might be meaningful for not only his future, but the future of his family. “Investing has the ability to create generational wealth,” said Joe. “This wasn’t something I took lightly.”
Joe began looking around for financing options. Secfi emerged as a top contender, especially since some other companies he spoke to had a number of contingencies that made Joe less comfortable. “Secfi took on the risk in exchange for a very small share of the upside,” said Joe.
When Joe financed with Secfi, he wasn’t sure what would happen with his Confluent shares. But he was glad that Secfi took on the risk. “Letting an investor take a risk for a share of the upside made a lot of sense to me,” he said.
Financing with Secfi allowed Joe to exercise his shares within the 90 day period without any risk to his personal assets.
Joe’s bet paid off, as Confluent went public not long after he exercised. “Having the shares in Confluent has made it possible to do a level of investing I never thought possible,” he said. “I’m now aggressively investing what I’m earning and working with a financial advisor to help diversify my portfolio.”
Now that Joe is on the other side, he’s urging others to jump on board.
He recommends that others do their homework and learn about their options. He also says not to wait. “If you’re going to shop around, do so quickly and then make a decision,” he said. “If you wait, you’ll have to wait for the next 409A to come out and then reassess your tax debt, and it is likely to get a lot higher,” he said.
Joe knew that exercising his shares was a huge responsibility. “This is a huge responsibility because if I do it right, it impacts my children and their children, he said. “Financing with Secfi is a no-brainer because you can’t lose.