074: My Framework on How to Build Wealth with Tech Equity From Equity to Exit

00:00 - 26:29 | Christopher Nelson: The biggest thing that was plaguing me when I came out of my first failed startup in 2010 was how does it all work? I saw people who were working for equity and they were making money and then I saw people who did that, they were then stuck in their jobs, but I saw this set of people that would work for some amazing companies and then they would exit and then they would be investing in startups, they would have some real estate, they would have this holding and unlock this lifestyle of design. That's what I became fixated on and I wanted to understand and how that worked. That's what I wanna share with you today. Welcome to Tech Equity and Money Talk. I'm your host, Christopher Nelson. And here we talk about strategies to how you build wealth working for tech equity and manage the money that comes with it. And our goal, our mission here at Tech Equity and Money Talk is to allow you to become so educated that you're very comfortable and confident when you're making your biggest decisions when it comes to equity and when it comes to managing the money that comes with it. Now, today I'm going to be sharing with you from equity to exit, my framework of how you can accelerate financial independence by working for tech equity and how to manage the money that comes with it. Now, I want to start with a question. The question is, have you ever felt trapped in the corporate grind of working for tech? Have you ever felt like you're doing things well, you know, working, you're earning a high salary, working for good equity, but you don't understand how to get out? And in front of that, the blockers that you see are the 24 by 7 lifestyle, the work-life balance challenges, and then also just not knowing and not understanding how you go from being this person that can generate a lot of income to managing it and how it works for you. If this is you and you're asking yourself the question, I'm in tech, I'm making good money, I'm building my net worth, but I don't know how to get it to work for me, then this is the episode for you. This is why I built out this framework because honestly, I was struggling with the same thing. I was struggling with the same thing and I shared this in a previous episode where in 2010, I really needed to go to work for equity to figure out how do I build wealth. My first startup was a big bust because I didn't have a framework. I didn't understand how it worked. Then after that, I started developing a framework, keeping copious notes and talking to a lot of people to figure out how to work for equity. Then I went through my first IPO in 2012, great multiple seven figure payday, but then I didn't know how to get the money to work for me. And that's where I've been spending the last 12 years figuring out how to build a portfolio as a business in creating a financial fortress to support myself and my family. I'm here to share with you my process from equity to exit. This is going to be the high level framework. I'm going to be spending the next few episodes going into deeper detail of each of these pillars. But I want to break it down for you today so that you can see from a high level how it works, because this is where you can start understanding and seeing the path forward to get out of these jobs that, you know, can control us 24 by 7 and also the golden handcuffs is by really seeing a framework of how it all works together. So I'm gonna discuss the four pillars. There's four pillars from equity to exit. First, there's expertise. Expertise is where you develop skills to a level where you can build a brand and a business around them. I'm going to double click on all these in a moment. Then there's equity. How do you trade your time and talent for high value equity that can generate maximum wealth for time spent? Then there's the evergreen portfolio. That's the third one, the evergreen portfolio, which is how do you turn your hard-earned equity? How do you build a business around your investments to turn your hard-earned equity into a financial fortress that can support you and your family for generations? Number four is the exit plan. The exit plan is what ties all of those together is how are you managing building your skills, developing your equity in a clear career and financial plan that gets you to your exit so that you can walk away from your W-2 in the future. The ultimate goal of equity to exit is that you own your own time. And you've done this because all of your hard work that building the equity has turned it into this financial fortress, and you've been able to systematically build it and walk away and build the lifestyle that you want. So who is this best suited for? I am talking to financially focused technology employees. meaning that you're somebody who works for equity compensation as part of your compensation package. You are getting shares in a technology company, whether those are ISOs, private company shares, NSOs, or RSUs, it doesn't matter. If you have equity compensation as part of your compensation package, and you want to become financially independent, meaning that you're willing to put in the work it takes to execute this, this is for you. And it doesn't matter whether you're early in your career or late in your career, this framework can help you get grounded, understand what you need to do to be able to get to your exit. That's why I built this framework and why I talk about this framework. I'm doing some writing around this framework to share with you so that it's no longer a mystery. We can go from hearsay and hearing how people were successful by leveraging tech equity to live a lifestyle where you see them investing in things and they're sort of living off their portfolio. How does all that work? That's what this is all about. So now I'm going to go a little bit deeper. Again, this is not the deep dive into each of the pillars. I'm going to have an individual episode on each where I'm going to go deeper. It's going to be complimented by an article, complimented by a very specific how-to YouTube video because I want to make sure that everybody here can understand this and remove the mystery. So the foundation of this framework is your expertise. Your expertise is what you have to trade for equity in the first place. When you walk in the door to a technology company, whether you're in marketing, human resources, finance, you are an engineer, you're in operations, you're in customer support, it doesn't matter. If you have skills and you have experience, even if that's in another industry, if you can bring that to the table and articulate how you're going to deliver value for this technology company, you can start trading for equity. But it does start with your skill. And so, You have to think of your expertise, the skills that you're building to expertise as your most valuable asset. Because as you build that over time, whether you decide to specialize and go deep in a particular technology or function, or whether you go broad and you go into management and you're starting to lead teams, the more you develop that expertise, the more that you can trade for it. And expertise is really saying that you have been continuously developing these skills getting real world experience, real world means that there's money at stake, or there's, you know, you're impacting clients, you're impacting the company, like you're, you're doing something that has a broader impact. And you're not just, you know, and again, I'm not trying to say like, you could be R&D as well, but you're actually delivering something where there's dollars on the line, if you can get experience, and then articulate the results that you've delivered, that then really is this package of expertise that allows you to then negotiate for equity. And the other thing with expertise is you then want to be able to invest that expertise and trade that for valuable equity. And that's what starts the wealth generation. So expertise is where it starts. You have to have something to trade because that's what it is. If you're not a founder, if you're not buying equity with money, you're not an investor, then what you are is you're a trader and it's an exchange. So you have to be able to then have skills, you have to be able to articulate those values, the value of those skills in terms of results, and then you can go trade for equity. So how do you leverage it for maximum benefit? If you want to leverage your equity, you have to be able to articulate your value. And this is where you want to use your corporate roles, your roles in tech to be able to take risks, get experience in customer facing projects, anything that impacts the customer And in being able to show results, how you were able to, whether that's improve sales, improve customer retention, improve customer satisfaction. Those are the types of metrics that if you walk into another company and say, I am going to be able to deliver this for you and here's my results. That's where you're actually going to be able to get leverage in the trade. So maximize your benefit by using your corporate roles to get the experience, being able to articulate the results. It's really that simple. Then you start positioning yourself as rare and valuable, meaning you understand the market. You understand what uniquely you're able to bring to the table. That's not repeatable. That is unique. That can be the combination of your personality, of how you actually build teams, and deliver great results. Those are the things that are going to be able to create leverage when you're when you have expertise in your trading for equity. So having expertise, foundational pillar number one. Foundational pillar number two is equity. That's what you're trading for. Equity is important because that's how you build wealth. You build wealth when you're not just trading time for money, but you actually own valuable assets that are increasing in value based on what other people are doing as well. This is why in Rich Dad, Poor Dad, Robert Kiyosaki talks about the fact that if you are able to build a business and you have ownership shares in a business, that scales while you're sleeping. Well, I think that he missed something. And there's this construct, I call it Nelson's Bridge, where if you think about it, you can be an employee and an owner. You can join those two quadrants by trading your time and talent for equity. And then you're able to get the subside. But equity allows you to compound your career compensation because you're getting a salary. And then you're also getting equity that if you're invested your time and talent in an appreciating asset, that's going to continue to grow in value regardless of how you're spending your time. And that's, that is the key is being able to build your expertise and trade it for equity in valuable companies. And so it's important that, you know, working for equity is crucial. That is the key here. This is what people who work for equity across all technology companies, public and private, on average, make 35 percent more per year than those that don't. So and if you think about that, 35 percent of your salary comes to an equity that can then also, in addition, grow without you adding more time and effort. That's where you get the real value of equity. So what are some strategies for maximizing equity compensation? Strategy number one is knowing what valuable equity is. There's a lot of noise out there, a lot of people and hearsay that talk about, oh, you got to go to the earliest stage startup. That's where the valuable equity is. Nothing could be further from the truth. The reality is that valuable equity is going to be liquid. It is going to be appreciating, growing in value, and you can trade it when you want to. Those are the three factors of the most valuable equity that you can trade your time and talent for. And those are going to be found in public companies. And there is a lot of money to be made there. I remember I was coaching a guy named Adam and he was really wanting to, he was working for an early stage startup. He had a significant amount of equity, but he couldn't unlock it. And he really wanted to invest in real estate. And so we sat down and went through an exercise where I wanted to understand what his risk profile was. Like really, he was working in this very high risk situation. Like what was his risk profile? And it came back that it was low risk, low reward. So I recommended to Adam that he work for a public company. And when he saw my recommendation and some of the companies I'd identified, he said, you're crazy. Everybody always knows. Everybody knows. You only make money working for the early stage startups. I said, okay, okay. That's what everybody says. But what I'm telling you is that you want equity right now to meet your goals. You want equity that is liquid, that's growing in value, that you can trade when you want to trade. So what I'm going to ask you to do is go to some interviews. Take some of these companies. We identified a few companies. He went to some interviews. He ended up going to work for a ride sharing company. and it was 2021. And he got his salary matched with equity. They gave him downside protection. And that summer, I think three months after he started, the stock price shot up from 21 to 61. He had a clear divestiture strategy because he wanted to invest. He was within 18 months able to take these high six figures off the table, if not seven, And again, I don't know what his tax situation was, but the reality was, is he was able to take and go from a high risk situation where he was not seeing any additional income to all of a sudden being able to harvest an additional to his $225,000 a year salary. He was able to harvest, you know, high six, almost seven figures in equity because he focused on valuable equity. So equity is critical to this whole thing and you need to understand what equity is. So expertise, leverage that to get equity in the companies. Then there's this big pivot. There's this evergreen portfolio. So evergreen portfolio, some people get taken aback, like what does that mean? Well, at the highest level, it means that you are building a portfolio that has a growth component, has a very large income component. income not coming from the sale of assets, but income coming from operations of your investments, meaning that you're owning real estate, commercial real estate, or businesses that are giving you ongoing operational income so that you're not depleting that core principle, that capital that you originally invested. And the way that this is done is you have to start diversifying into private equity. And private equity is a whole other world. I will put some of the links to some of the other podcast episodes I've done on private equity in the show notes so that you can start digging deeper into that. But essentially, that's what an evergreen portfolio is, it's a diversified portfolio that has growth, that has income, and the income should be able to manage all of your expenses plus more so that you can then live off of that portfolio and that portfolio can continue for generations. This is why understanding what an evergreen portfolio is. And the biggest thing is shifting your mindset from making money to managing money. Many technology employees, and this is part of where they get stuck, is they can get the, oh, I understand the expertise. I know how to work for equity. But you really then need to understand how do you build as a business an evergreen portfolio that you are nurturing and growing because that then becomes the engine for your financial independence. And that's how all of these things working together, I develop the expertise to work for equity, to then amass a large holding in equity, diversify it into my evergreen portfolio, that is then generating the income. And so where do you start? Well, you start right here. This is why Tech Equity and Money Talk is here. I have a podcast episode where I go over my portfolio strategy, the 50-50 strategy. I go into detail around what alternative investments are. I've done interviews with people who own different types of alternative investments so that you can get educated and understand what they are, because it starts with education. Understand what it takes to manage your money and be the manager. Then, you know, everybody's going to start with traditional stocks and build a nice diversified portfolio with some good index funds and then grow from there. But don't stop. Don't just get some of those and stop. Continue to grow and understand what it means to manage your portfolio as a business. And you're the CEO. And that's if you go back to the previous episode right before this, this is where I gave an overview of, I had questions like, what does that mean? Go listen to that. I break down what it means to manage your portfolio as a business. So that pillar number three was an evergreen portfolio. And the last one is the exit plan. This is crucial because this ties everything together. Your exit plan helps you begin with the end in mind. You have to, if you're building this financial engine that's going to support you and you want it to continue forever beyond you, you need to then start understanding and defining what do you want your lifestyle to be like in retirement? What do you really need from living expenses? What do you want for your lifestyle expenses? How long are kids going to be in the home? Now it's essential to plan for elder care, to plan for, you know, taking care of the other generations. I know I'm right in the sandwich generation right now, taking care of my kids and then working with my parents as well. It's essential that you plan for that. So you begin with the end of mind and then the exit plan is going to then guide your decisions. It's going to guide, okay, how much do I want to invest in myself to grow my expertise? You know, how, then what's the equity that I want to trade for? Am I conservative right now? Am I taking more risk? How much was my time horizon? And then it all focuses onto your portfolio and your core financial plan of how much income am I producing? Okay. I'm producing a hundred thousand dollars a year. Let me keep investing that for two or three years, because then I can 1.52 X that in a short period of time to then get me to where I need to be, where this is self-sustaining sustaining itself. That's sort of how an exit plan works. You want to make sure your exit plan is a living, breathing document. Things change. I know we were thinking about having two kids. Our second pregnancy turned out to be a set of twins. Boom. Things change. So make sure that it's a living, breathing document and you're willing to be flexible. And the key elements for an effective exit plan is, you know, setting clear, you know, financial and lifestyle goals, like really setting that expectation and being willing to turn those knobs as things change. Make sure that you do have milestones and timelines. And then understand that when you build something like this, make sure that you have a real big reason, not just, I want to get to financial independence, but you have to go a few levels of why deeper. And I know for myself, financial independence was the immediate goal. And as we were building it and having a family, I realized that my ultimate goal was I wanted to be really present when my boys were walking from childhood into manhood. I wanted to be super present. I didn't want somebody else dictating my schedule. I want to be able to manage it myself. And so that really became my why. And now there's other things tacked onto it. I love being an educator. I love creating and having a flexible business where I can help people make their most important equity and money decisions. So all those things come into play. So that is the overall, those are the four pillars doing again, just sort of a cursory dive into them, giving you the overview of what they are. I'm going to be spending the next few weeks going deep into all of those and also making sure that there's some supporting articles as well on tech equity and money news. Make sure that you go there and review the articles. So what are some of the common obstacles? I think, gosh, it's so, I think the biggest obstacle is, if you feel over busy. You feel over busy with work. So where do I have time for this? And this is where it's so important that you start setting up some boundaries and managing your time more effectively at work. Number one, the other thing that's important to understand is the more you get your financial house in order, the more you start building this evergreen portfolio as a business and you can see how that's going to support you, how that's going to really work for you, you get motivated. you get passionate about building this thing because you see, oh my gosh, it really works. And for all of us, that moment is really different. I know that when I started in 2013, 2014, I was getting some private equity investments, making small investments at first, and you're getting $500 a month, $600 a month, $900 a month. Like, okay, how's this going to make an impact when you know, my bills are much more than that changed for me drastically. When we had made a move from the Bay area to Texas, we sold our home in the Bay area with the proceeds from that. We purchased our primary residence and five single family homes and those five single family homes then started paying, you know, a few thousand dollars then combined with our other income we were getting all of a sudden we realized like, Oh man, Like our living expenses are being taken care of. Now, granted, our living expenses all of a sudden got a lot lower. So that was incredibly helpful. And this is where, you know, that's a whole other topic of conversation of how, you know, moving to different geographies can unlock lifestyle for you. But that was the aha moment for me when it's like this can really work. And we all have, you're all going to have those different moments when that works. But I think feeling overwhelmed and confident that it works like that journey is one of the biggest challenges and you have to keep working at it until you get there. I think I lack financial knowledge and where to get financial knowledge. And this is what we're trying to be for you. I know there's other sources of information. I don't know where it's consolidated and focused on what you're doing right now, but please, send me an email. You can go ask at techequityandmoneytalk.com. You can send me an email, but I'd be curious to know where some other sources are. They just really focus it from building and earning tech equity to then turning it into financial independence. And then the lack of financial knowledge. So what are some of the strategies for overcoming these challenges? You have to have that big reason. If your why is big enough, you are going to break through and you're going to keep moving forward. You also have to remember, like, what is valuable equity? Don't get caught up in the trap that I'm smitten by this startup and the mission and all of these things. Like you have to have a good filter that says, what is the best return for my time and talent? You have to. And then subscribe here. I'm here to keep you educated, to keep, you know, just real functional knowledge working from people that have been there, done that and trying to remove all the fluff and just give you what works and continue to iterate on that. So as we wrap up, let's think about, okay, how do you manage success? Like what are some indicators? And I want to give you some high level indicators of just how you know when things are moving in the right direction? So when you're working on your expertise, the biggest indicator is do you see over time your total compensation clicking up? And especially when you're making those moves from one company to another, is it really ratcheting up? Then you know if your overall comp package is really starting to move the needle, then you know you're building skills and expertise. If you're not, maybe you're not talking about it the right way. Maybe you're not articulating your results and what you've done in a way that's going to get you that leverage. But again, that's another skill. You can go fix that. But the biggest metric around expertise is your total compensation clicking up at the pace that you want to see it. Equity. Are you seeing your net worth trend up? Do you actually have, you know, can you live off of your salary and can you save all your equity? And is your equity coming in meaningfully? Is it multiple paychecks? Is it an additional paycheck or is it multiple paychecks a year? That's how I always thought about it. I thought, okay, if I can live within this paycheck and bonus, and we can do everything within that that we need to, then I can save all of my equity and I am earning one paycheck. I had years where I was getting 10X paychecks. and I just stuff those away, not touch those and put those into the evergreen portfolio. That's how you know you're being successful with equity when you're able to store those away. Then there's the evergreen portfolio. I think the simplest thing is, are you building a portfolio that you clearly can see I can live off of the proceeds and it's structured in a way where I can sleep at night? I'm just trying to give you some big indicators. There's obviously different metrics and dials once you get down into it and you run it as a business. And then the exit plan is, do you have the next goal and are you moving towards it? Simple, all these things, I wanna keep it. The goal of this episode was to unlock your brain, to give you the red pill and say, it's possible. Like you can unlock yourself from the matrix by using these foundational principles of expertise, equity, evergreen portfolio and exit to get to where you wanna go. So we've covered a lot of ground today and are excited to bring you this. I want you to know that It's a journey. It's a journey. But now that you see these building blocks, you can understand what are some of the dials, what are some of the foundations that you need to build to move from one to the next to the next? And how do you have some rough measurements and know how you're doing? If you're really ready to start on this from equity to exit journey, we've created a landing page. It's an article that will then link you out to other things that you can go deeper. You go to exitwithequity.com and that's going to take you to a page where you can then see this broken down for you. You can then go and dig deeper into other things so that you can explore and understand. Also subscribe to our YouTube channel, Tech Equity and Money Talk. Follow our podcast. and then sign up for our newsletter. We also have Tech Equity and Money News, where we try to make sure that every week we are giving you some more strategies to work for equity and to manage the money that goes with it. Thank you so much for tuning in today to Tech Equity and Money Talk. Hope you've enjoyed this episode. Until next time, keep building your expertise, keep growing your equity, and building out that financial freedom. Thank you very much.