Apr 3, 2023 - Economy

Startup launches to provide loans to unicorn employees

Illustration of a 100-dollar bill, with a unicorn horn poking through it from Ben Franklin's forehead.

Illustration: Brendan Lynch/Axios

Tech unicorns are finally adjusting to their valuation buzzcuts. The IPO window is spackled shut. Vested employees who once dreamed of Porsches are now just worried about keeping up with Prius payments.

  • It's the moment that Ari Stiegler has been waiting for.

Driving the news: Stiegler is co-founder and CEO of Prism, a new lending platform focused on startup employees.

  • Prism formed nearly a year ago, quietly raising $26 million over two venture rounds, but waited on origination until the correction seemed to have settled out. Had Prism begun lending upon founding, it might already be underwater.
  • "I've always hated how there's basically no liquidity in the market before an exit event," Stiegler explains. "In real estate you can refinance against underlying assets, so if you can borrow at 70% loan-to-value against a building, why not at 10% against a later-stage startup that's profitable? Particularly now that average secondary values are down and we're in a more realistic pricing environment."

Zoom out: The idea of using startup equity as loan collateral isn't new, particularly as companies began staying private longer. What's different about Prism is that it works directly with startup boards, instead of encouraging employees work around them, and doesn't take any potential equity upside.

  • This also means that Prism has access to a company's financials, in addition to secondary trading data.
  • The Los Angeles-based firm says it has several signed deals to begin originating "nine figures" of loans within the next couple of months (based on indicated demand).
  • Stiegler and fellow co-founder Noah Friedman declined to identify the companies with which Prism has agreed to work, or the banks with which it's partnering.

Backstory: Speaking of co-founders, Prism has a third: Ryan Breslow, best known as the outspoken founder and former CEO of Bolt Financial.

  • You might recall that Bolt, under Breslow's direction, offered loans to its own employees. That plan didn't work out too well.
  • Breslow now says that the formation of Prism "stemmed out of the experiences" he had both with Bolt, and as a founder trying to obtain personal loans.

The bottom line: For some companies, dark times are the ray of light for which they've been waiting.

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