Unicorns and RSUs

I have to start off today's blog saying that I never imagined a context where I'd see the words "unicorn" and "restricted stock unit" in the same sentence. I guess that was my first mistake - never say never, right? Turns out, thanks to a tweet from myStockOptions.com that led me to a recent NY Times article, I've learned that you can use unicorn and RSU in the same sentence. How, you ask? To get the full answer, you'll have to follow me as I explain a phenomenon taking place in Silicon Valley - involving both.

Isn't a Unicorn a Mythical White Horse with a Horn? 

If you are conjuring up images of a white mythical horse-like creature with a pointy horn, yes, that's the unicorn I was thinking of also. However, the term is also being used to describe a new generation of tech start up companies. The New York Times describes these unicorns as "a class of hot start-ups valued at $1 billion or more. There are now more than 124 unicorn companies, according to CB Insights, a research firm that tracks start-up." The largest and possibly best known unicorn is Uber.

Unicorns and RSUs

So where do the RSUs come into play? It appears that the tech variation of unicorns are stealthily and steadily poaching top talent from many other more established tech darlings - impacted companies include Google and Amazon. The carrot used to entice the talent? You got it - none other than RSUs. Lots of them. At this point, I'm reminiscing back to the dot com days of mega sized stock option grants offered to lure talent to start ups. Silicon Valley and the tech world in general have been no stranger to these talent wars. What appears to be different this time around is that the poachers are unicorns - heavily funded and backed by deep resources. Perhaps with that comes a stronger potential for success - at least in the eyes of some. These aren't tech companies who are simply promising hope - in many cases the hope is already a reality. Uber is valued at more than $50 billion. That could feel pretty attractive to prospect employees who are eyeing the healthy sized RSU awards offered by the unicorn. According to the NY Times article, "To snag employees from large rivals, unicorns have a simple recruiting pitch: They are on a path to success, as illustrated by their rising valuations. Many offer generous equity packages of restricted stock units that can later translate to big paydays for employees if the unicorn goes public or is sold — a lure that neither Google nor any other public tech company can dangle. Also, the unicorns say they are far more fleet-footed and cutting-edge than large organizations."

The issue of pursuing top talent and the impact on the organization left behind is not a new one. It's the rapid rise of the unicorns and their arsenal of both compensation and arguments of an apparent path to future success that appears to be a significant issue for other tech companies. Top executives at Yelp and Amazon have both publicly acknowledged that their talent is being recruited by other organizations. Yelp's CEO acknowledged that the unicorn bubble is having an impact on their organization.

What's the Impact on Stock Plans? 

I'd like to know if stock plan administrators are feeling impacted by the unicorn situation. In my mind I see a rapid sequence of offers and counter offers, along more volatility in hiring/terminating employees, and I'm wondering if that affects the timing of how organizations have typically handled their grant approval process. Has there been an increase in "one off" or off cycle awards due to the reactionary nature of responding to an employee who has received an offer from a unicorn? Or are Silicon Valley stock plan administrators just as surprised as I am to head the word "unicorn" in the same sentence as "RSU"? If you're a stock plan administrator in the tech industry or Silicon Valley, share your insights with us by taking the quick poll below: