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Edit: the assumption of 0.01% is also absurd.
A simplified calculator should include reasonable defaults. This is like a mortgage calculator called tldrCanYouAffordAHouse.com that assumes 25% interest rates and doesn't disclose that.
Well, then it's misleading.
Between AMT, capital gains / income tax, there's potential for a huge chunk of what you might earn to be removed.
Earlier quoted context omitted.
I completely disagree. It's really not hard to find a company with great product market fit, say series B, get a bunch of equity, a decent salary, and wait a couple years for your equity to be valuable. Assuming the company is successful (of course there's risk there, but by series B a lot has been mitigated), your equity will likely be quite valuable. I actually think, risk adjusted, that's the easiest way to make a…
> my [startup] equity was worth about 50% of my salary each year. The equity of many AmaGooFaceSoft employees is also worth at least 50% of their yearly salary.
GGP covered that option quite nicely. Those are companies that are clearly at the top companies of the decade, maybe even longer.
Earlier quoted context omitted.
Serious question: Would you have enough data at this point to tell me how many lottery tickets I could buy to replace the odds of winning on startup options based on option metadata (startup round, options granted, etc)? Think of it as investment diversification.
In the worst case, an option is going to be worth 0 and in the best case it's going to be worth > 0, so the value of an option is always positive until the company actually dies. Lottery tickets, unlike options, cost money up front. You still can't lose more than you pay, so the payoff curve is similarly non-linear, but unless you can trade options for cash options will always beat lottery tickets. Lottery tickets ar…
That's only true as long as you're still working at the company. If you leave, you have to exercise, and then the worst case becomes negative.
Earlier quoted context omitted.
Yes but that's if I were to sell it after ~1 year at a company you've likely never heard of. If I wait 3 more and there's a large exit it could easily be worth millions.
Do you have a convenient way to sell your startup equity after ~1 year? (i.e. before there's an exit)
This is fantastically useful both as a side-of-the-barn estimator, and a teaching tool. Thanks! Two things a lot of startup employees are unaware of that are worth highlighting: they actually have to buy their options, which eats into returns, and that if they leave the company they have a limited window (30 days, typically) in which to do so. In would behoove them to save/plan for this fact.
This is especially true in this time where even successful companies drag their feet when it comes to IPO. If you don't think you can't afford to buy the options and pay the taxes (yes, there's taxes when exercising illiquid options), then you have to discount the chances of still being with the company at the time of a liquidity event. This means you can find yourself valuing stock options very little, even in cases…
That's a very weird statement. Companies are under no obligation at all to ever offer stock to the public.
An IPO comes with all kinds of downsides and many companies simply do not feel the benefits weigh heavier than the downsides. Such as: transparency, SOX, all kinds of restrictions and demands regarding communications, dealing with the SEC (or the local equivalent) and so on.
Correct me if I'm wrong, but this seems to be assuming a seed round valuation of $40 million (it's returning $0 unless the exit is > $40m). That's absurd. Edit: the assumption of 0.01% is also absurd. A simplified calculator should include reasonable defaults. This is like a mortgage calculator called tldrCanYouAffordAHouse.com that assumes 25% interest rates and doesn't disclose that.
Why probability of exit of series B company lower than series A? That sounds, at least, counterintuitive.
Earlier quoted context omitted.
"Yep, IMO unless you are a founder, if your company isn't one of the top companies of the decade your 4-6 years of pay-cut toil as an early employee will likely just not be worth it, at all." Not worth it financially, considering opportunity cost of not working somewhere that pays more. Just pointing out that there could be other non-financial benefits from working at a startup, that might make it worth it. Everythin…
I'm at a startup now. When I was looking for a job last year, I had 3 offers and this startup was the lowest in terms of compensation and while the other two offers were higher they were with large corporations. While I'm a little disappointed in my pay, I get a ridiculously flexible schedule, work from home whenever I feel like it, I put in some extra work last weekend so my boss just told me to take tomorrow off (w…
For example, someone who is a VP at a startup might equate to a typical Manager at a larger company. Someone who is a CTO or Chief Architect at a startup might be a Senior Engineer at a larger company.
Large companies have an approximate scale in mind for their titles, where a Manager, Director, VP, etc. are responsible for (on average) a certain number of people reporting to them, and a certain amount of budget. "Director" level at a large company may entail responsibility for hundreds of employees and significant budget. That director has far more actual responsibility and scope than a startup "VP of Engineering" with a 10-person team.
To put it in different terms:
Anyone can pay $50 to incorporate online and they'll be a CEO. The actual prestige of the person and their CEO title significantly depends on the prestige and scope of the company. From a career perspective, what others will care about and evaluate are a person's actual scope, responsibilities, and accomplishments.
So be careful about viewing a title as a reward; a better reward is an actual increase in scope, responsibilities, and compensation.