Uber’s IPO is finally here, which means that Beyoncé got her money. Back in 2015, she performed at a private Uber function in exchange for a $6 million equity stake. The move has already been celebrated as one of Bey’s many boss moves.
Now, equity deals are speculative and sexy—especially since Bey herself has proudly rapped “pay me in equity.” But let’s take a step back. It’s still a risk like any investment. A number of factors can impact future returns.
Here’s a breakdown of how it really played out for Queen Bey:
- Based on Uber’s 2015 valuation, the Lemonade signer’s stake should be worth around $9 million. A 50% jump in four years is legitimate, but it’s a bit underwhelming for one of the biggest IPOs in years in a bull market. As a comparison, each FAANG stock has more than doubled in that same time frame.
- Anyone with an equity stake is also bought into the company’s public standing. As we all know, Uber has taken a number of Ls. In 2016, the company made headlines when its employees got caught for spying on celebrities and public figures, including Beyonce herself!
- Two months after her privacy was breached, Susan Fowler Rigetti released her blog post on the sexual harassment she experienced at Uber. It exposed the ridesharing company’s toxic culture. Uber became the poster child for everything that was wrong in tech.
At this point, Beyoncé may have had buyer’s remorse. Her husband was also invested in the company’s future, but he got in much earlier and has much more to show for it.
Jay Z invested in Uber back in 2011 when it was worth $300 million. Uber’s valuation has increased roughly 275x since then. If Jay is worth the rumored $930 million that various sources have reported, then a $250,000 Uber investment in 2011 is now worth around $70 million. It would officially make him a billionaire. A hip-hop first!
Bey is not the only one whose equity endorsement deals have had their ups and downs. Back in 2015, NBA star Stephen Curry signed an equity endorsement deal with Under Armour. At the time, both the Warriors guard and the Baltimore-based apparel company were soaring. The partnership was glorified, especially since Under Armour’s other athletes—namely Cam Newton and Jordan Spieth—also had career years.
Eventually, Curry lost a bit of his sky-high popularity and Under Armour made several strategic missteps. The deal is still in effect, and the company’s stock has bounced back, but there’s less upside than there once was. I’ve also seen Curry’s sneakers on sale at Ross Stores, which is not a good look.
Celebrities are rich enough to willingly take on the risk, but everyday people are more likely to evaluate the tradeoff between equity and cold hard cash—especially with their own compensation packages. I have this discussion with friends all the time. Those who work in tech have internal clocks that countdown the months until they are fully vested at their companies.
Two years ago, I turned down a lucrative offer to work at a Bay Area startup that is now a newly-minuted unicorn with an IPO on the horizon. At the time, this forthcoming IPO was heavily pitched as a selling point to join the team (and should have happened already based on the rough timeline I was given). I had a much easier time negotiating for more stock options than salary, which is common. But I felt that my equity upside was limited given where the company was already at.
It felt more like Beyoncé’s Uber investment in 2015, and less like Jay’s in 2011. These things are hard to predict, but that’s the assumed risk that’s taken on. Timing is everything.
Note – had I taken that offer, I never would have had the time to launch Trapital. It all worked out.