Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

How much startup stock options are worth

danshapiro.com

Post reply on HN
Print view View original

31–40 of 46 posts

Re: How much startup stock options are worth

#31

Post by tptacek »

danshapiro wrote: post #30
URSpider94 wrote: post #23

Earlier quoted context omitted.

Key phrase: tyranny of the majority. You can bet that the founders and VC's (or other institutional investors) own a super-majority of the shares. Therefore, they can simply write the rules to give themselves whatever they want. For even more fun, sub-groups of VC's can team up to force out founders or other VC's. One way this is typically done is to increase the share count by 10X, then sell these new shares for 10…

One mistake in the above: the right to participate in future financing rounds has nothing to do with qualified investor status, and everything to do with whether your agreement guarantees it. Good CEOs will often make sure all their investors are given a chance to participate (because it's the right thing to do and reduces the chance of one class of lawsuits) but it's only a guarantee if your documents say it is.

I was locked out of an investment round at one company because of qualification status. I'm pretty sure being meeting the accredited investor standard actually does matter, at least if you're not an employee and the round involves an exchange of money for financial instruments.

Re: How much startup stock options are worth

#32

Post by gamble »

Employees should consider their options to have an expected value of $0. (With a not insignificant variance...)

There are so many ways things can fail to pan out or you can get screwed, and employees simply can't protect themselves in the way an investor or founder can. If significant participation in an exit is important to you, the only logical option is to be a founder yourself. Trying to get a payoff as an employee is little better than gambling.

My rule of thumb is that if the options influence your behavior at all, you're over-valuing them.

Re: How much startup stock options are worth

#34

Post by GeorgeTirebiter »

johnrob wrote: post #9
abeppu wrote: post #5

Does anyone have any advice on how you're supposed to tactfully get all the info required to do this computation? During my recent job search, I received offers with options from companies who refused to tell me what the count of fully diluted shares was. No one was particularly comfortable answering questions about expected exit. When I tried to ask various questions to estimate some kind of ballpark value for the e…

I would try to get the company to answer these questions: - Which is the most likely exit?: 10 MM, 100MM, 1B, 10B? - Which best approximates my ownership?: .0001%, .001%, .01%, .1%? If you can get answers to these, it's probably enough of an anchor to make an assessment. There so much variance in the outcome that additional accuracy won't add very much to the analysis. EDIT: I should rephrase the first question as: W…

What is "MM"? Millimeters? I'm joking of course, but I don't understand what "MM" means in a money context. I know that $1K is one thousand dollars, $1M is one million dollars, $1B is one billion dollars, $1T is one trillion dollars, and gosh, by now, we're talking some serious coin... but "MM"? Even if MM were Roman Numerals, one would have to assume an implied multiplication.

Re: How much startup stock options are worth

#35

Post by krevis »

GeorgeTirebiter wrote: post #34
johnrob wrote: post #9

Earlier quoted context omitted.

I would try to get the company to answer these questions: - Which is the most likely exit?: 10 MM, 100MM, 1B, 10B? - Which best approximates my ownership?: .0001%, .001%, .01%, .1%? If you can get answers to these, it's probably enough of an anchor to make an assessment. There so much variance in the outcome that additional accuracy won't add very much to the analysis. EDIT: I should rephrase the first question as: W…

What is "MM"? Millimeters? I'm joking of course, but I don't understand what "MM" means in a money context. I know that $1K is one thousand dollars, $1M is one million dollars, $1B is one billion dollars, $1T is one trillion dollars, and gosh, by now, we're talking some serious coin... but "MM"? Even if MM were Roman Numerals, one would have to assume an implied multiplication.

In a finance context, MM means million.

Re: How much startup stock options are worth

#36

Post by cageface »

In the first .com boom I worked for a company that had a 60 million funding round. By the time I left I decided not to bother exercising my options for pennies a share. The company never went public. None of the many people I knew working for startups at the time saw a dime of profit from their options either.

The stock I got from the much larger, already public company I worked for next turned out to be worth a nice chunk of change though.

Re: How much startup stock options are worth

#37

Post by kevinpet »

yoak wrote: post #13

I really appreciate this article. Unimaginably, most programmers I interview to this day in late 2010, react primarily to number of shares an offer includes option to buy. I've written offers with (made up numbers) option to purchase 10,000 shares at a strike price of $0.10 and had candidates, asking no questions, attempt to negotiate for 20,000 shares which is something that they'd be more comfortable with. In my ad…

I don't see what's so horrible about that. By the time you get to the offer, you have an idea of the current valuation of the company. The price * options = $1000 already tells you if the company can grow 25x, you'll make on the order of $25k.

Or maybe you're just saying who the hell bothers to negotiate over $1000 over 4 years. I guess that's a valid point.

Re: How much startup stock options are worth

#38

Post by [deleted] »

GeorgeTirebiter wrote: post #34
johnrob wrote: post #9

Earlier quoted context omitted.

I would try to get the company to answer these questions: - Which is the most likely exit?: 10 MM, 100MM, 1B, 10B? - Which best approximates my ownership?: .0001%, .001%, .01%, .1%? If you can get answers to these, it's probably enough of an anchor to make an assessment. There so much variance in the outcome that additional accuracy won't add very much to the analysis. EDIT: I should rephrase the first question as: W…

What is "MM"? Millimeters? I'm joking of course, but I don't understand what "MM" means in a money context. I know that $1K is one thousand dollars, $1M is one million dollars, $1B is one billion dollars, $1T is one trillion dollars, and gosh, by now, we're talking some serious coin... but "MM"? Even if MM were Roman Numerals, one would have to assume an implied multiplication.

[deleted]

Re: How much startup stock options are worth

#40

Post by jlgosse »

The frustrating thing about this is that you rarely ever hear about early employees getting filthy rich, even in HUGE companies.

This is why starting your own company and going for broke seems much more appealing, as having 10-20x what your first employees might have is really a game changer. Couple this with the fact that many first employees may end up doing much more work than the founders, and things can get really perplexing.

Post reply on HN