Figma goes public today. Seed investors were locked up for 12 years. That’s a long time to wait! But here’s why we should be grateful for lockups…

Every company goes through hard times. If we were allowed to dump our shares, we probably would!

Then, we’d miss out on enormous gains when the founder figures it out.

Figma in the Wilderness

Figma is a great example. It took founder Dylan Field over 2 years to release a product.

I don’t know about you, but if I’m an investor in a startup that’s taking that long to ship a product, I’m getting worried. “What’s the hold up? Will they ever ship?” I begin to wonder.

Of course, Figma did release a product, and it was an enormous hit. Fast forward a decade, and they’re going public for almost $20 billion.

Learning From My Top Investments

Figma is not alone in suffering hard times before becoming a major success. If I look at any successful startup I’ve invested in, it went through a rough patch.

A year of 0 growth. Loss of a major customer. Legal issues. Macro headwinds.

It’s always something. And as much as I want to think I’m a diamond hands, I might have sold my shares had there been a market for them.

That would’ve been a huge mistake. I would’ve been bailing out of the biggest successes in my portfolio.

How Long Is Too Long?

Of course, we all need liquidity eventually. I agree with Bill Gurley that companies should go public earlier, perhaps around the $100-200 million ARR mark. By that point, a company is a major success.

Going public cleans up the cap table mess of numerous share classes. It provides important liquidity for your employees and investors. And it also introduces a new level of discipline.

Without the public markets to scold him, Mark Zuckerberg might still be frittering away tens of billions on the “metaverse,” whatever that is.

Wrap-Up

Liquidity is great once a company’s a huge success. But being locked up early is a blessing in disguise.

It takes a thousand twists and turns before a company hits the big time. You see today’s success. But you don’t see all the failure it took to get there.

And during all that failure, it can be hard to keep the faith.

So the next time you look at your portfolio and bemoan the lack of liquidity, take a step back.

Being locked up can be nerve-wracking. But one day, it might put millions of dollars in your pocket.

More on tech:

Have You Seen These Valuations Lately?

The Three Metrics That Could Save Your Startup

Are Hackers After Your Brain? — The Rise of CogSec

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