First, congratulations to the team on closing a blockbuster funding round to further propel Anthropic’s remarkable growth! With the funding round complete and an employee tender offer announced, many employees are thinking about their equity. This post isn’t going to focus on how to “optimize your equity ahead of an IPO”, though I’ve written about this topic previously for those who are interested in learning about equity planning strategies ahead of an IPO. Also, this isn’t a post of yet another financial advisor telling you to “sell and diversify your concentrated stock position”. Rather, I want to focus this post on a concept that may not be on your radar.
Before diving in, one thing that is unique about Anthropic is that there are quite a few employees who come from outside of the tech industry. Individuals who have spent their careers in public policy, research labs at universities, and as practicing attorneys. For many of them, this is new territory being the first time they have ever received stock options or RSUs. Even for those employees who this isn’t their first rodeo with equity compensation, the exponential valuation growth in such a short timeframe may be a first for you.
For this post, I want to focus on the concept of “funded contentment”. This can mean different things to different folks, but ultimately this is defined as having the ability to align financial resources with personal values to support a purposeful life. It’s the mindset shift from pursuing “more” to defining “enough”. In the book, The Geometry of Wealth, Brian Portnoy writes about this topic and he outlines the “4 Cs” framework: Connection (relationships), Control (autonomy), Competence (mastery), and Context (purpose), as the key areas for a meaningful life.
So why write a post on this topic associated with a tender offer?
With this rapid ascent and continued growth trajectory for Anthropic, the value of your equity has the potential to be life-changing (for some of you, maybe it already is!). I’ve spoken to a few individuals who joined the company just two years ago who have seen their equity value surpass eight-figures. For many of these individuals, this amount of money is more than they ever imagined they would possess. As a financial planner, I’ve witnessed both the joys and perils of sudden wealth, as well as how big decisions surrounding money can be highly emotional. Once of the best ways to alleviate the stress associated with high stakes financial decisions is to have a plan for your equity.
Whether you’ve had a savers mindset up to this point and your thoughts are shifting from “do I have enough?” to “how do I not mess this up?”or if you have been heads down building a company, raising kids, trying to be a great spouse, and haven’t thought much about your equity, this post is equally for you as well.
Artificial intelligence is changing so quickly and there are still a lot of unknowns regarding this technology and how it will shape society going forward. While I won’t attempt to predict how things play out in the future, I do believe it is important to be planning for your equity and what it could mean for your life despite the many unknowns. Before modeling exercise scenarios and building financial projections, I believe it’s important to think about and make equity decisions within the broader context of your financial life. To help facilitate this process, I like to start by asking the following question.
“If the value listed in Shareworks was in your bank account, would you change anything about your life today”?
I’ve asked this question to dozens of folks over the past year and responses have varied quite a bit. However, one common response is “well, I wouldn’t retire, if that’s what you’re asking”. I primarily work with individuals in their 30’s and 40’s, so retirement is not often their primary focus. Although, many of these individuals do have other interests outside of their day job and realizing $10M would position them to be well on their way to not needing to work. Even if retirement isn’t the goal, financial security could also mean pivoting into a less lucrative role that energizes you and gives you greater control over your time. Beyond the topic of work, the real reason I ask the question is to give someone the space to think about what’s possible for their future and how money can enable them to pursue this.
I’ve been amazed by some incredibly thoughtful responses that I’ve heard to this question.
- “I would love to help cover the costs for my parents to move out to California and get a place out here so we can see them more often and they can be present with our kids”.
- “It would be pretty sweet to go to the Dominican Republic for a windsurfing trip!”
- “I’ve thought for years about getting my private pilots license. Maybe the tender proceeds could cover private flight lessons and renting a plane to practice”.
- “It’s our 10th wedding anniversary this year. We got married in Maui, so it’d be awesome if we could cover some of our friends to get out there for a week to celebrate with us”.
- “I’ve made a few investments into early-stage ventures and really enjoy scouting for up & coming companies, so additional cash would give me the ability to make more investments”.
The costs and long-term financial implications range with each of these situations, but the point is that each of these individuals were able to identify ways that using proceeds from the value of their equity would improve the quality of their life in a meaningful way today. In each of these scenarios, all of them still maintained an 80%+ stake in their company stock.
One other underrated aspect of a tender offer – it provides a great opportunity to phase into wealth. Selling 10-20% of your equity at a known, fixed price gives you a chance to see how you feel when a wire transfer for seven figures hits your checking account. Not to mention that having secured a base amount of tangible, liquid cash from your equity can make the process of patiently waiting through a six month “lock-up” period post-IPO much less nerve-wracking.
So as you evaluate your decision to participate in this tender offer over the weeks ahead, I encourage you to think about what does “funded contentment” mean to you. Congrats to all the Ants, I’m excited for what’s ahead!