Founders and early startup employees have a unique opportunity to create personal wealth.

Startup equity can be a powerful asset. Your shares can become immensely valuable as you scale your company and hit key milestones such as a fundraising round, IPO or M&A. If all goes according to plan, founders and their employees will potentially be sitting on an impressive pool of personal wealth. There are plenty of investment structures and charitable causes to consider.

The ups and downs of startup life can make it difficult to think ahead. “I’ll worry about my personal wealth once a liquidation event is on the horizon,” many entrepreneurs say. However, experts encourage founders and early employees to get a head start.

Recently, we put together an event to help startup founders and employees manage their wealth. The panel included Steve Braverman, Co-Chairman of family office and advisory firm Pathstone, Todd Angkatavanich, Partner at global law firm McDermott Will & Emery, and Margot Navins, Vice President of Corporate & Executive Giving at Fidelity Charitable. 

These experts delivered perspectives on the financial, legal, and charitable sides of startup wealth management. 

A common theme united these experts’ insights: whether your startup is about to go public or preparing for a Seed round, it’s never too early to start planning your financial future. You never know when a big sale or product breakthrough could set the dominoes in motion for an IPO, M&A, or company sale.

“It's really never too early to plan,” Braverman said. “Your equity event or monetization event might be right around the corner based on that next round of testing or that next key client.”

These experts had four tips for their entrepreneurial audience:

Start with a quality 409A startup valuation

Stock options and equity are inherently tied to your company’s valuation. That’s why it’s so important to generate a 409A valuation you can trust.

Angkatavanich, Partner at global law firm McDermott Will & Emery, provided a cautionary tale of the potential troubles of skimping on your valuation. Angkatavanich helps high-wealth individuals set up arrangements such as a trust, an agreement that allows a trustee to hold assets on behalf of beneficiaries. 

Oftentimes, founders and employees with equity will gift some of their shares to the trust. However, if the valuation is off for any reason, the IRS might find issues with that gift in the future.

“If it’s not the right kind of valuation, the IRS could come back at any point in the future and say, hey, that gift you made 25 years ago, we don't think that you adequately disclosed it,” Angkatavanich said. 

Start with a strong, trusted valuation to help avoid legal and tax messes down the line.

Build a strong team of financial and legal advisors

It’s okay if you don’t know how to set up a trust or gift your shares — you can consult financial and legal experts for that.

Family offices, advisory firms, and legal firms are all designed to help ambitious entrepreneurs maximize their personal wealth and explore various investment structures. Even if it feels early, it’s a great idea to start having conversations today. That way, these pros will understand how you’ve invested and distributed your wealth from the beginning.

“As founders’ financial and philanthropic footprints expand over time, having a team that's been there from day one — that’s seen the evolution and realizes the historic reasons for different items and different structures — is so important,” Angkatavanich said.

Wealthramp is a fintech company that connects startup employees with fee-only advisors that help them meet their financial goals. This type of service can help you plan for your future — and also represents an attractive benefit for prospective employees.

Connect with a like-minded community of entrepreneurs.

Paid experts will help you execute your financial vision. You can sometimes get equally impactful advice from people who’ve been in your shoes: advisors, investors, and your network of entrepreneurial friends.

Braverman, Co-Chairman of family office and advisory firm Pathstone, preaches the “power of community” in the world of founder finances.

“That community affords the opportunity to engage, learn, participate and contribute,” Braverman said.

You’ll learn valuable lessons from the entrepreneurial community. You also could build valuable connections that lead to opportunities for growth.

“You don't have to wait for your liquidity event,” Braverman added. “You may be already asked to join a board…you may be asked to be part of a committee that's looking at complex term sheets, inbound capital, etc.”

Don’t forget to give back.

Many entrepreneurs and startup employees find value in giving back to the communities that enabled their success.

Charity doesn’t have to be writing a check. Volunteering your expertise to a charitable organization can be a great start. Founders and employees can get creative by gifting their equity, an asset that can grow meaningfully over time.

Navins, Vice President of Corporate & Executive Giving at Fidelity Charitable, says that founders and startup employees are often dynamic forces for charitable causes.

“What makes the entrepreneurial donor unique is they approach their giving with a really hands-on approach,” Navins said.

“They’re wanting to be involved with the nonprofit they're giving to, wanting to be involved in the decisions that are being made about how the funds are being used. That really mirrors the way those entrepreneurs are approaching their business.”

This hands-on approach can help founders and startup employees grow not only their company — but the personal wealth that comes with successful scaling.

Are you a founder or startup employee looking for more visibility into the value of your financial assets - including stock options and startup equity? We've come together with Weathramp, which can connect people to the right fee-only advisor who may help them meet their financial goals.

Reach out to Fidelity to learn more about our collaborations that are helping startups and their employees confidently select the smartest solutions on the market.


Third parties mentioned and Fidelity are not affiliated.

Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.