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Journey from Startup to IPO

November 2, 2024 by Richard Bloom, CFP®

The lifecycle of a private company is evolving.

Over the last two decades, the timeline for companies to seek an entry to the public market has increased. This public market parade has only confirmed the story that data is telling us – companies are choosing to stay private longer.

With venture capital money flooding into the private sector and generally fewer regulations to comply with, remaining a private company offers the flexibility to grow and innovate at high-speed. But, what happens to shareholders along the way?

Private companies often grant equity-based compensation to retain talent and drive performance. Shareholders in the private market are holding onto equity waiting for the moment they can transform their stock options into monetary wealth.

Where did all this begin? Well, quite fittingly, it began with startup companies. When your company is just starting out, cash can be limited. Granting equity compensation may supplement cash to attract and incentivize the talent you need to grow your business.

Startup Equity Basics

As a startup company leader, here are a few things that may be helpful to know as you administer your equity program:

An organized cap table to show equity transactions from investors, founders and employee-shareholders.
An up-to-date 409A valuation, which ensures you’re compliant with IRS regulations when offering equity compensation.

Startup founders may view equity management as a necessary administrative task, rather than a mechanism for growth. They may be looking to grant equity compensation, show investors they are organized and know the company ownership stakes, maintain compliance and model some financial choices like comparing term sheets.

Equity Management While You Grow

After the startup grind, your equity needs and perspective can begin to change. New needs will arise, including added complexity to your equity administration and compensation strategy.

In the growth stage, a company has likely:

added a more substantial employee base
faced more compliance requirements like financial reporting
gone through multiple funding rounds
considered expansion

In terms of equity management at this stage, you might have a dedicated resource handling your cap table and compliance, whether that is a CFO or Stock Plan Administrator. You may also have a solid number of shareholders with vested stock options.

Those shareholders may be looking to see the value of their equity. It may be beneficial for them to have visibility not only for transparency, but also to help create a culture of ownership.

Another part of company growth is adjusting your compensation strategy. As you’ve moved through funding rounds, your cap table has potentially grown from a few founders, key team members and early-stage investors to a wider range of employee grants and investor holdings, which may have required heavy-duty cap table organization.

With these changes, you may not be granting equity to every new hire and with more cash at hand from those funding rounds, your compensation plans may have shifted to a custom mix of equity and cash.

Late-Stage Equity Management

Assuming your company doesn’t go through an exit, you will soon evolve from a growing company to a mature company. And once again, your needs will change.

Compliance might be an even bigger concern for you now, as is advising on liquidity events and a path to the public market.

As a mature company, your cap table is a complex and living organism, tracking transactions from grants to funding rounds, vesting schedules and terminations. You may seek a tender offer to present a liquidity opportunity to long-term shareholders, or you may seek an IPO.

If you’ve expanded globally, your team is likely looking to understand additional regulatory requirements as well as navigate local tax rates and rules for dozens or hundreds of jurisdictions. Our Global Intelligence tool may be able to help as you navigate global growth in your equity program.

Whether you’re an emerging tech company with a handful of names on your cap table or a late-stage life sciences organization, your equity and compensation needs are sure to change over time. Morgan Stanley at Work can provide equity solutions for any stage of your company’s journey.

DISCLOSURES

Article by Morgan Stanley and provided courtesy of Morgan Stanley Financial Advisor.

Richard bloom is a Financial Advisor in 1290 Avenue of the Americas at Morgan Stanley Smith Barney LLC (“Morgan Stanley”). He can be reached by email at Richard.Bloom@MorganStanley.com or by telephone at 212-893-7597. His website is https://advisor.morganstanley.com/the-mayergelwarg-group

Insurance products are offered in conjunction with Morgan Stanley Smith Barney LLC’s licensed insurance agency affiliates. Not all products and services discussed are available at Morgan Stanley.

Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning and other legal matters.

This article has been prepared for informational purposes only. The information and data in the article has been obtained from sources outside of Morgan Stanley. Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of the information or data from sources outside of Morgan Stanley. It does not provide individually tailored investment advice and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this article may not be appropriate for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

Richard Bloom may only transact business, follow-up with individualized responses, or render personalized investment advice for compensation, in states where he is registered or excluded or exempted from registration, https://advisor.morganstanley.com/the-mayergelwarg-group.

How to Handle Volatility

February 25, 2023 by Richard Bloom, CFP®

The big market declines we’ve experienced over the past year can be unnerving for investors, often triggering emotions of fear and concern. However, such declines are historically not unusual. Market volatility fluctuates based on where we are in the business cycle and due to external events that heighten risk and threaten growth. It is a normal feature of markets that investors should expect. When markets sell off, investment returns will head lower in ways that can leave investors with material losses.

Does that mean you should try to sell when the market’s “high” or sell if it starts to fall in order to reduce the potential for that kind of unpleasantness? Not necessarily. Here’s why:

Common Investing Mistakes

It’s extremely difficult to predict the timing of a market downturn with the accuracy needed to profit from such a prediction. In other words, it is easy to get such a prediction wrong, which can be costly. While we do tilt our portfolios more aggressively or more conservatively based on our market outlook, the data shows that individual investors who radically reposition out of stocks in an attempt to catch the tip of a market top reliably miss out on gains more than they prevent losses, and generate excessive transactions and tax costs along the way.

While “buy low, sell high” may sound like time-honored advice, the challenge of getting it right means in practice it rarely is a good way to make decisions. Indeed, individual investors who “sell high” and go to cash waiting for a market downturn to come and go, often lose patience as stocks continue to go up. This results in their missing out on gains rather than preventing losses. That costly mistake is the reciprocal of another, wherein panicking investors sell their holdings during a market selloff, potentially locking in losses as stocks rebound while they remain on the sidelines. The prevalence of these value destroying behaviors helps to explain why individual investors as a group tend to dramatically underperform market benchmarks.

There is a caveat to the generally superior buy-and-hold approach, which is that seeing a paper loss in your portfolio doesn’t feel good. Some investors would rather take less risk, which may mean giving up some long-term returns, in order to reduce the period of time they may need to wait out losses, making for smoother sailing.

Consider Your Goals

Another factor to consider is how you’re doing relative to your financial goals. That’s where a Financial Advisor can help by talking through goals and priorities and reassessing your portfolio based on where you stand. For instance, if you are saving toward a goal and have made good progress, it may make sense to take on less risk, regardless of the market outlook. This is for two reasons. First, it intuitively makes sense to take less risk when you have more to lose than to gain. Second, for additional peace of mind that your progress won’t be jeopardized, you may desire the lesser uncertainty that can come from a more conservative blend of stocks, bonds and cash.

If, like many of us, you have more progress to make and more road to travel towards achieving your goals, riding out the market’s jitters can be the best advice. Our research shows that markets are most predictable when you have a seven- to 10-year time horizon (due to how well current yields and valuations predict returns over those horizons). Our forecasts continue to suggest that stocks will outperform bonds and cash over that time horizon.

Bottom line: Working with your Financial Advisor can help you avoid short-term thinking and remember that investing is a long-term proposition. Keeping your eye on the horizon is your best strategy as an investor.

Risk Considerations

Equity securities may fluctuate in response to news on companies, industries, market conditions and general economic environment.

Asset allocation and diversification do not assure a profit or protect against loss in declining financial markets.

Rebalancing does not protect against a loss in declining financial markets. There may be a potential tax implication with a rebalancing strategy. Investors should consult with their tax advisor before implementing such a strategy.

Yields are subject to change with economic conditions. Yield is only one factor that should be considered when making an investment decision.

Certain securities referred to in this material may not have been registered under the U.S. Securities Act of 1933, as amended, and, if not, may not be offered or sold absent an exemption therefrom. Recipients are required to comply with any legal or contractual restrictions on their purchase, holding, and sale, exercise of rights or performance of obligations under any securities/instruments transaction.

Disclosures

Article by Morgan Stanley and provided courtesy of Morgan Stanley Financial Advisor.

Richard Bloom may only transact business, follow-up with individualized responses, or render personalized investment advice for compensation, in states where he is registered or excluded or exempted from registration, http://www.morganstanleyfa.com/mayergelwarggroup; http://brokercheck.finra.org/Search/Search.aspx.

Getting to Know Richard Bloom: The Making of a Great Financial Advisor

August 24, 2020 by Grace Bennett

Richard Bloom’s first memory of the stock market was when he was a young child. He would hear his grandfather talking about buying shares of GE. “I didn’t know what it meant, and actually thought he owned the whole company! Eventually he taught me what it really meant to buy and own a piece of a company. As a way to educate myself and my siblings, he asked us to pick a company we liked and agreed to buy us each 10 shares of that company.”

Of course, as any kid would do, Bloom chose Toys R Us! “As this was the pre-internet era, he bought us graph paper and taught us how to look up the ticker in the newspaper each day and chart the price of the stock,” said Bloom. It was his first introduction to investing, “but more importantly, it was a great learning experience and bonding opportunity with my grandfather.”

This early introduction ignited a desire in Bloom many years later to study finance in college. From his career’s start nearly 15 years ago, he has worked with the same team, The MayerGelwarg Group at Morgan Stanley. His two partners, each with over three decades experience have taught him that what makes a great advisor is not only helping clients develop sound financial plans, but doing so at the highest level of service.

Building Relationships

Today, the part of Bloom’s job that he loves the most is the deep lasting relationships that he has built with his clients. “My job is not only to ensure they are taking the right steps toward financial security, but to assure and reassure so they can handle the emotional side of investing in the markets,” he explained. “This entails asking very specific individualized questions during a first and second meeting to understand how the client views the world and what impact that will have on their emotional fortitude during the inevitable ups and downs we will experience together.

“From the moment I meet a prospective new client, it is my responsibility to demonstrate financial acumen and understanding of their unique needs,” Bloom continued. “Knowing my clients seek out and trust my guidance is incredibly rewarding.

Since the pandemic, Bloom has interacted with many individuals within and outside of the industry who wonder how he and his clients are handling the stress and uncertainty. While acknowledging the increased demand in terms of time and energy, Bloom has also found it to be one of the most fulfilling moments of his career. “Now more than ever, clients and potential clients are razor focused on the importance of having an experienced financial advisor. I continually remind my clients of the plan in place to ensure their short-term needs will be met under any market conditions without jeopardizing their long-term financial goals. And most importantly, if/when there are changes to their personal situation, we can make any necessary adjustments needed. While we cannot control the markets, we have complete control over the decisions we make together.”

Discipline as Key to Success

Bloom emphasized that although there are virtually no barriers to investing in the markets on your own, a great deal of discipline is required to be successful in the long run. “Investors must develop a strategic asset allocation and stick to it; they have to rebalance across asset classes including selling outperforming investments; they also must understand the tax ramifications of each trade because at the end of the day, it’s not about what you make, but what you keep.”

If any one thing frustrates Bloom, its hearing of investors who panic and sell out of the markets at the lows and miss the inevitable rebounds. During his local “Wine and Wealth” seminars at Le Jardin in Chappaqua, Bloom has maximized the opportunity to educate numerous members of the community. “These are fun, low-key social and educational events where I team up with one of our portfolio managers to present on different investing topics,” he said. “My goal is for all attendees to walk away with a few investment concepts that they can use to prevent themselves from making financially detrimental mistakes.”

Bloom and his partners also practice what they preach. “We make it a focal point of our business not to invest our clients’ assets in anything we ourselves or our families are not invested in. Most financial advisors cannot say that,” he stated. “Our asset allocation, or the mix of stocks and bonds, may differ but the portfolios we utilize for various asset classes are the same. We do this to eliminate any conflicts of interest and our clients take comfort in knowing that we are invested alongside them.”

Westchester Living

Bloom is proud to call Westchester home, a perfect choice to establish roots personally and professionally. His wife Marisa grew up in Chappaqua. Bloom, originally from the Philadelphia suburbs, originally thought he would move back there. “However, I quickly learned that once I married a New York girl, I’d be here for life. And now I absolutely love it.

He said his kids love spending time at Gedney Park, and always look forward to the Chappaqua Children’s Book Festival and the Armonk Cider and Donuts Festival. His family visits the local farmers markets every weekend as well. “We make it a priority to shop at and support local businesses. We couldn’t be happier living up here.”

But no matter how grounded one might feel in the community, Bloom understands how ‘unsettling’ the markets can be right now, and the feeling of uncertainty that comes along with it. “The markets also tend to operate in the exact opposite way of how we live our lives and are hardwired to think,” said Bloom.

“In the very short term, people generally know what is going to happen to

them–what their schedule is going to be tomorrow or next week or next month. Where we will be in 10 years has a much wider range of outcomes and very little certainty.

The ‘Long Term’ Mindset Advantage

“The markets, on the other hand, have much more certainty in the long run while there can be extreme volatility in the short term. Understanding this helps alleviate my concerns for what is happening in the world right now. No doubt we are experiencing sea-level changes in our country and society; however, when you look back in history, changes are always taking place with industries being disrupted. Being able to take advantage of these changes, block out the noise, and stick to your long-term plan through it all provides you with the best chances of success.”

A recent article by Bloom in this press discusses strategies to help investors remain focused during turbulent times, even when it can be hard to think clearly. (https://www.theinsidepress.com/staying-focused-in-turbulent-times/)

Most meaningful for Bloom has been growing with his clients and witnessing wonderful things that happen to them in their lives. What he has found is that many times those great things do not have anything to do with wealth. That thinking has accorded Bloom perspective. “There are three simple rules I try to live by: First, be a good person and respect others. Second, surround yourself with people you like and can learn from. And lastly, don’t ever sweat the small stuff, including a bad day in the markets!

To reach Bloom, write to Richard.Bloom@morganstanley.com

Staying Focused in Turbulent Times

May 22, 2020 by Inside Press

By Richard Bloom

While today’s markets can be nerve racking for even the most experienced investors, those who approach it with a long-term plan in place have a much greater chance of protecting themselves from mistakes and seizing the opportunities that lay ahead. The best way to take advantage is to create a goals-based approach to wealth management using a disciplined four-step process. The first–and often the most important–step is discovery, an honest, open conversation about your goals and your entire financial picture. In the second step, your Financial Advisor works with you to assess various scenarios and advise on appropriate strategies designed to help you meet your goals. Your plan should safeguard your short term needs while strategically positioning you to ensure your long term goals will be met. Once you have agreed on a personalized wealth strategy, your Financial Advisor advises how to implement in the most efficient way. Finally, as time progresses, your Financial Advisor will regularly review your financial situation with you, making adjustments according to your needs, life events and changing market conditions.

In addition to taking a goals-based approach, below are some further tips on how to navigate through this unpredictable period.

When the market is volatile, almost everyone thinks about their financial future and the potential impact such fluctuations may have on their retirement accounts. However, it is during these turbulent times that it’s important to remember certain basic, time-tested principles of investing.

Continue Contributions

It may not seem intuitive, but continuing to contribute to your retirement plan–even during market downturns–can potentially enhance your returns over the long-run. A down market can be an opportunity for you to acquire more shares of your investments at a lower price. Consistent investing through market ups and downs is called “dollar-cost averaging.” If an investment’s price is high, you buy fewer shares, or units. When prices are low, you buy more. Investing regularly, using dollar-cost averaging, can help reduce the risk associated with buying during big swings in market prices.

Diversify

If you’ve ever heard the saying, “Don’t put all your eggs in one basket,” then you already have a basic understanding of diversification. Diversifying your portfolio can reduce risk and volatility. Review your account and make sure your portfolio is not too heavily weighted in company stock, or in any single asset class.

Stay Invested

You may be anxious about the decrease in the value of your investments. But don’t be tempted to move out of the market, sit on the sidelines and wait for prices to rebound. Trying to time the market could potentially jeopardize your financial strategy–and your future goals.

Maintain a Long-Term Focus

Any investment decisions you make should be based on your financial goals and objectives, time horizon and risk tolerance, rather than concerns about market volatility. Even if the market seems volatile, remember that ups and downs are normal. It is important to stay focused on your financial future and refrain from making short-term decisions on long-term investments.

History demonstrates that there will always be some degree of uncertainty and volatility in the markets. While market events are out of our control, we do have control over our financial objectives and how our investments are allocated to help us achieve them. If you would like assistance in determining the mix of asset classes that can help you meet your financial objectives, contact your Morgan Stanley Financial Advisor.

Disclosures:

Article by Morgan Stanley and provided courtesy of Morgan Stanley Financial Advisor.

Richard Bloom is a Financial Advisor in 1290 Avenue of the Americas, New York, NY 10104 at Morgan Stanley Smith Barney LLC (“Morgan Stanley”). He can be reached by email at Richard.Bloom@morganstanley.com or by telephone at (212) 893-7597. His website is https://advisor.morganstanley.com/the-mayergelwarg-group.

This article has been prepared for informational purposes only. The information and data in the article has been obtained from sources outside of Morgan Stanley. Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of the information or data from sources outside of Morgan Stanley. It does not provide individually tailored investment advice and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this article may not be appropriate or all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

Asset allocation and diversification do not guarantee a profit or protect against loss. Any type of continuous or periodic investment plan does not assure a profit and does not protect against loss in declining markets. Since such a plan involves continuous investment in securities regardless of fluctuating price levels of such securities, the investor should consider his financial ability to continue his purchases through periods of low price levels.

This material does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this material may not be appropriate for all investors. Morgan Stanley Wealth Management recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice and are not “fiduciaries” (under ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise provided in writing by Morgan Stanley and/or as described at www.morganstanley.com/disclosures/dol . Individuals are encouraged to consult their tax and legal advisors (a) before establishing a retirement plan or account, and (b) regarding any potential tax, ERISA and related consequences of any investments made under such plan or account.

CRC 2992110 03/2020

Five Tips for the Sandwich Generation Juggling the Needs of Your Kids and Your Parents Without Losing Your Balance

February 22, 2020 by The Inside Press

BY RICHARD BLOOM

In today’s fast-paced world, life can be hectic – especially if you’re among the growing number of adults caught in the middle known as the sandwich generation. According to the T. Rowe Price 2019 Parents, Kids & Money Survey, more than one in three parents with kids between the ages of 8 and 14 is also caring for an aging family member. Of those, nearly 70% have an aging parent or relative living under the same roof.¹ Being a dual caregiver can cause emotional stress and even financial strain, but planning ahead and seeking out the support you need can help you find – and maintain – your balance.

Here are some tips for living – and thriving in – the sandwich life.

1. Simplify where possible.

Simplifying your finances is a good first step in knowing exactly where you stand in terms of being able to afford your own retirement and still support your kids and parents. Many of us have our money spread across multiple bank accounts, brokerage accounts and even retirement accounts. Consolidating these accounts may make it easier for you to manage your financial life, removing a layer of stress and potentially making your assets work more efficiently, guided by a cohesive investment strategy.

2. Break the ice on family finances.

In many families, money is a taboo topic. But as your parents age and your children grow up–and sometimes boomerang back to the nest–having frank conversations about the family finances is a must. Take the brave step of asking your parents about their finances and how they would like their affairs to be handled if they are no longer able to make important decisions about their money or health. And talk to your children about your expectations when it comes to what you will pay for and what you expect them to pitch in. This is especially important if your grown-up children move back in with you.

3. Don’t be afraid to delegate.

You don’t need to shoulder all of the responsibility alone. Whether it’s finding a reliable babysitter for your kids, a trusted caregiver for your aging family member or someone to help around the house, delegating to others can help to ease the load. Talk to you kids about chipping in with household chores, or share caregiving responsibilities with a sibling. If you need outside help, ask family members and neighbors for recommendations or referrals. There are also websites and agencies that can help you with finding good care.

4. Explore all your options.

In addition to parental leave benefits, an increasing number of employers are offering caregiver support as part of their benefits package. You may also be able to talk to your employer about flexible work arrangements.

According to the Home Care Association of America and the Global Coalition on Aging, 70% of adults over age 65 will require assistance with their daily activities at some point.² Nursing home stays or in-home care can be expensive, and another option to consider is long-term care insurance.

5. Take care of yourself.

You want to give your all to the people who rely on you. But, remember, in order to provide the best possible care for your kids and your parents, you need to be at your best. That means carving out time to recharge your physical, emotional and mental batteries so you can make the time you give to your family more meaningful and effective. Just as flight attendants remind you to put on your own oxygen mask first in the event of a loss in cabin pressure, prioritizing yourself is sometimes part of maximizing your ability to help those around you.

Whatever challenges you face, working with a Financial Advisor who understands your circumstances and priorities can help you formulate a plan that is designed to safeguard not just your finances, but also your family.

FOOTNOTES

1. Money Confident Kids. 2019 Parents, Kids & Money Survey Results.

2. Home Care Association of America and Global Coalition on Aging. Caring for America’s Seniors: The Value of Home Care. Available here.

DISCLOSURES

Article by Morgan Stanley and provided courtesy of Morgan Stanley Financial Advisor.

This article has been prepared for informational purposes only. The information and data in the article has been obtained from sources outside of Morgan Stanley. Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of the information or data from sources outside of Morgan Stanley. It does not provide individually tailored investment advice and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this article may not be suitable for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

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