Paths not taken

I lost an easy chance to make three quarters of a million dollars. I’ll never forget that. But I don’t regret it.

Early in my career, I was working for a software startup company. I was the first employee the two founders hired. I was young and inexperienced, but I poured my heart into the startup and the founders appreciated what I was able to do for them.

As a result of my work there, they offered me the chance to buy stock in the company at a very reduced price. But these were not options — I actually had to buy the stock. I invested $3,000 of my pay into the stock.

After I left the company, my new wife and I were getting ready to buy our first house. We needed to scrape together a down payment. I sold one of our two cars; we would get by with one. And I kept thinking about the $3,000 in stock. Because the company was privately held, the only legal way to sell it was to find another investor in the company and sell it to him.

With the help of the company’s founders, I connected with one of their angel investors. He was willing to buy my shares for $6,000. I figured that doubling my money was a pretty good return, especially because I had little faith that the company would ever succeed. I’d already had experience with shares in a previous startup that ended up worthless. So I pocketed the $6,000 and, adding that to the rest of the money we’d saved, we put down a down payment on a house.

About two years later, something happened that I didn’t expect. The startup company defied my expectations and had an IPO. I did the mental math and figured out how much my shares would have been worth if I’d held onto them and sold them on the first day of the IPO.

$750,000.

Damn.

The hedge

A story like that isn’t worth much unless you learn from it. And I did learn something. I still think my judgment about the company was accurate — and sure enough, it tanked a few years after going public. But my alternatives were not “keep the stock” or “sell the stock.”

There was a third alternative: a hedge. Keep some and sell some. Certainly, in hindsight, it might have been better to keep the stock. But lacking a crystal ball, I could not have know that. However, I could have, say, sold three quarters of the stock and pocketed $4500. The extra $1500 wouldn’t have made a big difference in the down payment. But in the unlikely event of the company going public, I would still have an upside. In this hypothetical scenario, I would have netted $187,000.

Whenever I have a financial choice to make now, I try not to go all or nothing. I seek the hedge. I look for a taste of the upside and protect against the downside. It was a hard lesson to learn, but it did stick.

The rest of the story

As I look back on this story, which I’ve told myself and others many times, I have realized that there is more to it than I thought.

You see, I made a nice profit selling that first house we bought and moving up to a bigger one.

I invested in the new house with money from a different company, one that I never expected to go public, but did. The profit from that was well ahead of what I would have gotten from my $3,000 worth of stock in the startup’s IPO.

The new house has appreciated in value, like all the other real estate in Boston, and one of these days I’ll sell the house and move somewhere cheaper — and clear a lot more than than the money I never got from the startup’s IPO.

Unlike the shares in the startup, I made an investment I could actually live in, and raise a family in. It paid off in more ways than financially. It paid off emotionally. And it made me smarter.

Not many people can tell a story of how they threw away three quarters of a million dollars. Sure, in hindsight, I might have done things differently. But I wouldn’t trade the life I have now, and the years I’ve spent since then, for ten times that price.

Maybe you made a decision you regretted. Maybe you learned something, as I did.

Live the live you have, not the life you could have had. You never know what’s around the next corner.