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Yes, your analogy is faulty. First, what you're given is a number of shares, not a fixed percentage of the company - if you're given 100,000 options at the sta
by gyardley 17y ago
Yes, your analogy is faulty.
First, what you're given is a number of shares, not a fixed percentage of the company - if you're given 100,000 options at the start of the year, you still have 100,000 options at the end of the year.
Second, the dilution that occurs through the issuing of shares to investors should make the company more valuable, not less - because the company takes that money and grows with it. Your shares are a smaller percentage of the overall company but end up worth more in absolute dollar terms. (If that's not the case, the company is wasting other people's money - the value of your shares goes down, but this is deserved.)
In other words, if you go from a 1% stake to a 0.1% stake through dilution and then get $20K of a $20M sale, you haven't been ripped off, you just overestimated the company's ability to turn your initial 1% stake into something meaningful.