Sign up to receive 5 free days of our daily summary for tech news.

Venture Capital Startups

Back in Vogue, Tech Lending Funds Cater to Pre-IPO Workers

More Silicon Valley investors are jumping into one of the most obscure niches in private tech finance: lending money to startup employees to profit from the windfall when the companies go public.

New employee loan funds are aiming to raise hundreds of millions of dollars, backed by institutional investors, private wealth managers and high-profile venture capitalists like Peter Thiel. They are based on the promise of big returns and the prospect of acquiring stock in hot tech startups. But questions remain about how much demand there really is for these types of loans, and whether the deals make sense for employees, who often end up paying borrowing costs many times that of a typical bank loan.

“If you looked at the terms, your natural reaction is, ‘Why on Earth would anyone do this? This seems expensive.’ The answer is simple: People do this to make more money. Even after all the cost, that’s the bottom line. ...These folks are smart and want to maximize the value of their equity.”

Gretchen Gottlich and Gary Benitt commented on this article.
Read comments from top tech and industry leaders
Joe Lonsdale
Joe Lonsdale
Founding Partner, Eight
Chamath Palihapitiya
Chamath Palihapitiya
Founder & Managing Partner, SocialCapital
Tina Sharkey
Tina Sharkey
CEO, Brandless
Jonah Peretti
Jonah Peretti
CEO, Buzzfeed
Adam D'Angelo
Adam D'Angelo
CEO, Quora
Brit Morin
Brit Morin
Founder & CEO, Brit + CO
Dustin Moskovitz
Dustin Moskovitz
Co-Founder, Asana
Christina Miller
Christina Miller
President & General Manager, Turner
Max Levchin
Max Levchin
CEO, Affirm
Adam Mosseri
Adam Mosseri
Director of Product, Facebook
Alex Mather
Alex Mather
The Athletic
Martha Josephson
Martha Josephson
Partner, Egon Zehnder
James Murdoch
James Murdoch
Co-Chief Operating Officer, 21st Century Fox
Andrew Kortina
Andrew Kortina
Founder, Venmo
Ben Chestnut
Ben Chestnut
Co-Founder & CEO, Mailchimp
Ruchi Sanghvi
Ruchi Sanghvi
VP Operations, Dropbox
Login or Subscribe to follow the discussions happening here and real-time in our   Slack Community.
‘People do this to make more money. Even after all the cost, that’s the bottom line.’