Winter is Coming (#3)
By Pranav Chaturvedi, Founding Partner, Favcy
You Pull The Strings of Operator Arbitrage
Operator arbitrage is in your hands!
Founders, giving out early equity isn’t bad. What is bad is simply forgetting your sincere investors!
Investors are invested in you to get some decent returns. It’s in your hands to find other investors who are willing to buy them out thereby giving you an opportunity to arbitrage.
This process may seem complex when you read it for the first time but is like buying your own stock from somewhere else on a pre-defined return and then re-selling somewhere else.
If you’ve done your job well, which is to grow the company - you will have an arbitrage between the early investors and new investors.
Why is this important?
1️. This provides an exit to your early investors. They can then utilise it to invest elsewhere if they’d like.
2️. It helps you in case your valuation is high and you need cash.
Word of caution: you have to be honest in this dealing, else this strategy will bite you in your a**
If you still find this very complex- you can DM me and I am happy to do a call to explain this :)