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

Startup Equity 101

quarter--mile.com

Post reply on HN
Print view View original

101–106 of 106 posts

Re: Startup Equity 101

#101

Post by singleshot_ »

vrosas wrote: post #26

One thing I've learned working for startups is if you're working for a founder who's already had a previous successful startup exit(s), two things are true: 1. the founder already has generational wealth and this current company means practically nothing to them. 2. they've already learned every trick in the book to keep the company's value in their own pocket and out of the hands of their employees.

If one successful exit teaches you every trick in the book, I understand why I know so many masterful M&A attorneys who didn’t go to law school.

Re: Startup Equity 101

#103

Post by phonon »

mvkel wrote: post #96
phonon wrote: post #62

Earlier quoted context omitted.

409a valuations explicitly take into account share classes/liquidation preferences. That's kind of the point. If the Preferred last sold for $1.00, the 409a might value the Common at $0.10 per share, which would then typically be the FMV strike price set in the next round of issued options. If the Common FMV has been steadily increasing from when you received your options, that would typically be a positive sign. Of…

Until the next financing round which might include more liq pref, full-ratchet anti-dilution, new shares issued, etc. Ultimately the 409a is for the IRS, not a mark for employees

The next financing round might also include a lot more money on the balance sheet too!

Re: Startup Equity 101

#104

Post by Eridrus »

jiveturkey wrote: post #64
Eridrus wrote: post #52

Earlier quoted context omitted.

I think the main takeaway from any startup stock advice is what this article starts with: you need to pick a good startup. The details all matter, but they all matter far less than that fact. People shouldn't lump all startups together and should have a long think about whether they actually believe in the startup they're joining.

Not sure if you mean that seriously, or with tongue in cheek. It takes a very healthy dose of luck and market timing to be successful. Even the VCs, the experts, don't know how to pick winners. They expect a 90% failure rate, and this is among the ones they picked ! As an employee you don't have the same profit structure in play -- you can only work at one startup at a time. You cannot spread your bets around and let…

I do mean this seriously.

YC manages truly incredible returns, and you can just... join those companies after they have gotten the YC seal of approval (or any other signal you like).

Unlike a VC, you do not have to "return the fund", so you are excited about a much wider range of outcomes than just the top outliers, and you are not locked in and can leave.

It is also much easier for an employee to get into a hot startup than an investor.

You also don't have to deploy a certain amount of capital or join a startup if you don't see one that you think will be successful.

Particularly in the b2b space, I think it's quite straight forward to see if the company is doing something valuable or if their idea is dumb and bad.

Re: Startup Equity 101

#105

Post by jiveturkey »

Eridrus wrote: post #104
jiveturkey wrote: post #64

Earlier quoted context omitted.

Not sure if you mean that seriously, or with tongue in cheek. It takes a very healthy dose of luck and market timing to be successful. Even the VCs, the experts, don't know how to pick winners. They expect a 90% failure rate, and this is among the ones they picked ! As an employee you don't have the same profit structure in play -- you can only work at one startup at a time. You cannot spread your bets around and let…

I do mean this seriously. YC manages truly incredible returns, and you can just... join those companies after they have gotten the YC seal of approval (or any other signal you like). Unlike a VC, you do not have to "return the fund", so you are excited about a much wider range of outcomes than just the top outliers, and you are not locked in and can leave. It is also much easier for an employee to get into a hot star…

> [Among YC companies,] 45% secure Series A (vs. 33% average), 4% to 5% become a unicorn (vs. 2.5% average), and 10% achieve an exit.

https://www.lennysnewsletter.com/p/pulling-back-the-curtain-...

Of those 10% exits, 50% are acquisitions. Acquisitions are rarely lucrative for rank and file employees. But even at 10%, you need to have a crystal ball as an employee. YC is not an especially strong selector. And unicorn is baseline success these days (the data is from 2025), so we at the 5% level not 10%. Maybe you aren't aware of typical equity grants beyond, say, employee 10. You need at least a unicorn exit to match a big tech salary.

I mean you're right, you don't have to return the fund. You have to match (risk-adjusted) the opportunity cost of a big tech salary. Incredibly hard and luck is the most relevant factor. Meanwhile, if you job hop out of the startup after startup because they mostly go nowhere, your resume quickly becomes uninteresting (ye olde 1 year of experience 5 times problem). So you do have to stick it out.

> idea is dumb and bad.

the idea rarely matters. ideas are free. execution is king.

Re: Startup Equity 101

#106

Post by Eridrus »

jiveturkey wrote: post #105
Eridrus wrote: post #104

Earlier quoted context omitted.

I do mean this seriously. YC manages truly incredible returns, and you can just... join those companies after they have gotten the YC seal of approval (or any other signal you like). Unlike a VC, you do not have to "return the fund", so you are excited about a much wider range of outcomes than just the top outliers, and you are not locked in and can leave. It is also much easier for an employee to get into a hot star…

> [Among YC companies,] 45% secure Series A (vs. 33% average), 4% to 5% become a unicorn (vs. 2.5% average), and 10% achieve an exit. https://www.lennysnewsletter.com/p/pulling-back-the-curtain-... Of those 10% exits, 50% are acquisitions. Acquisitions are rarely lucrative for rank and file employees. But even at 10%, you need to have a crystal ball as an employee. YC is not an especially strong selector. And unicorn…

This is a very cynical read of the data. Most of the companies discussed here are still too early to have an exit.

If you look at the early batches (which are the only ones where all the companies are dead or exited), then more than half of them got to an exit.

And looking at all the companies, only 13% have failed so far, compared to 10% with exits. And failures generally come way before exits, so the data is incredibly biased if not taken on a cohort basis.

I disagree that acquisitions are rarely lucrative. I have been part of several and they have both been good for rank and file (me).

> the idea rarely matters. ideas are free. execution is king.

This is true at the earliest stage where the idea is very fungible. And execution always matters, but there are people out here working on the 50th Travel Booking Assistant who you should not go and work for. If the idea didn't matter, YC wouldn't ask about it.

> your resume quickly becomes uninteresting (ye olde 1 year of experience 5 times problem)

Nobody is forcing you to spend your entire career doing 1 year stints.

Post reply on HN