Without IPOs, Some Startup Workers Pay Steep Price to Get Cash

Some Databricks employees and executives sitting on valuable stock options in the decade-old startup are considering going to extraordinary lengths to turn their private stakes into $30 million in cash. Investors say they have discussed a deal that would lend the employees money in exchange for a share in the proceeds of their stock if the enterprise software startup, valued at more than $30 billion, goes public.

The deal, which involves a financial derivative sometimes called a forward contract, would cost the employees millions of dollars in interest payments combined, according to an investment memo viewed by The Information. But it would help resolve two of the major challenges facing startup employees today: Many founders, such as Databricks CEO Ali Ghodsi, aren’t rushing to go public. And these startups also often block sales of employee shares to investors unless arranged by the company.