Many businesses are dealing with unprecedented market
uncertainty and financial stress on the back of COVID-19, forcing
some into cash conservation mode. As a startup's business model
may still be in development, these businesses, in particular, face
unpredictable cash cycles (even in normal circumstances) and
shortened runways, amplifying COVID-19's impact. This impact is
felt across the business, including the company's employees.
Accordingly, startup founders and executives should consider some
unique issues, including:
- Implications of depressed valuations on equity
compensation. Startups often incentivize early employees,
founders and management through equity interest—typically in
the form of an option grant. This is a key recruitment tool and
incentive for those individuals, particularly since the cash
component of their compensation is often below market. Equity
compensation packages may face significant risk on the back of
potential declines in company
