I was an early employee for a company I left about four years ago. I was able to negotiate a reasonable options package which I exercised long ago for only a few thousand dollars. Up until a couple years ago, i had assumed the 'lottery ticket' would never pay out.
Well, as it turns out, it looks like the company will IPO later this year or early next (as in the CEO has stated openly that this is the plan).
Anyway, brokers, middlemen and private investors have started contacting me via LinkedIn, as they can see that I used to work for this company. I've mostly ignored them up until now, but I was sort of curious what a serious offer might look like, so I responded to one recently. They forwarded an offer (via email, nothing Legal or binding) that would value my shares at around 80% higher than the previous round of funding by the VCs. In total, it would pay out in the low seven figures, which sounds like a lot, but due to my age (early 40s), family obligations (wife and 2 young kids) and where I work and live (SF Bay Area), this is, unfortunately, not the type of windfall that would enable us to retire and live off interest or anything even close to that.
Mostly it would allow us to afford a middle class home in a decent school district (we've always rented), maybe shave 5 years off our current retirement trajectory, take care of college expenses, buy a new car (current is 9 years old) and maybe take a vacation to some place exotic. Not too shabby, right?
So, assuming this is actually a serious offer (no reason to believe it is or isn't at this point) the challenge in all of this is that there is very little data on what the company is worth today or what it'll be worth on the open market, at least until they file an S-1 and we can get some hard data to look at. I have looked at comparables that have IPOed in the past few years, and can certainly get it down to a certain range of likely outcomes, but lots can change in a year and I really don't have much else to go on other than what the latest round of VCs paid.
I am all read up on the logistics of dealing with a windfall once it's there, but I'm still at the hemming and hawing stage. Should I really consider selling a portion or all of my shares (assuming I get representation from a lawyer clueful in this kind of pre-IPO share transaction) or wait for the open market to set a price at IPO? I'm having difficulty looking at the situation objectively I think because I've already held the shares so long, greed may be clouding my judgement and I haven't gotten any other offers to date from which to compare. I suppose if a dozen investors had sent me offers by now and I could see a consensus, I'd feel more comfortable making a decision, but no such luck at this juncture.
So I suppose the question is, what's the Boglehead-y thing to do? Is a bird in hand really worth two in the bush? What if the bird (private investor) represents a 100% chance at a middle-class lifestyle and the bush (IPO) represents a 65% chance at an upper-middle class lifestyle, 30% chance at a middle-class lifestyle and say 5% chance at nothing?