Bringing Hedging to Employee Equity
Javier Avalos, co-founder and CEO of Caplight, on building synthetic derivatives of private stock
The important shift is that private market infrastructure is starting to treat employee common stock as something that can be risk managed, not just held and hoped on. In practice, VCs already get downside protection through liquidation preference, while employees usually sit in the weakest part of the stack with no way to hedge or de risk. Caplight is trying to import public market style tools, like puts and synthetic exposure, into a market where common holders have historically had only binary choices, hold everything or sell outright.
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Private liquidity products have mostly solved one problem, getting cash out. Forge used forward contracts, EquityZen used fund structures, and Carta and Nasdaq PM focused on issuer run tenders. Caplight is pushing one step further, letting holders keep upside exposure while buying downside protection, which is much closer to how institutional investors already manage risk.
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This matters because common stock is structurally exposed. Secondary buyers often purchase common without the anti dilution and liquidation protections attached to preferred, which can make common far riskier in bad outcomes. The employee side of the cap table is therefore the part of the market with the most to gain from hedge like products.
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The broader market is already moving toward recurring liquidity for employees. Large private companies increasingly run tenders and structured sales to reduce concentration risk, improve retention, and make startup equity feel more like real compensation. Synthetic hedging is the logical next layer on top of that liquidity stack.
From here, private markets are likely to look more like public markets in slow motion. First comes better data and cleaner transfer infrastructure, then recurring tenders, then hedging and structured products for employees, founders, and funds. The winner will be the platform that makes private equity usable as compensation, not just valuable on paper.