4 ms·

>> Options do have a calculable value, if you can determine the risk of failure for the company. Yes, because every company that has ever failed was predetermi

>> Options do have a calculable value, if you can determine the risk of failure for the company. Yes, because every company that has ever failed was predetermined to be a failure long before they went out of business. Give me a break. I've watched companies of varying sizes do extremely well for several years, which then fall apart into ashes in a matter of a month or two. You can't assign value to options unless you are in the process of cashing them out.

20yrs_no_equity 10y ago
There are multiple types of value. Some of which that you often see in startups is calculable. For instance if the strike price is X and the last funding was at Y then there's an intrinsic value to the options of Y-X. If that's positive you can make an estimate of the likelihood of the company being viable long enough to realize that value and then discount that value by that amount. EVERYTHING involves risk. A risk adjusted calculation isn't a guarantee but it's also not irrelevant simply because there's risk. If I will pay you $1 for every number that comes up on the dice, unless its a 1 in which case I pay you nothing, would you ante up $0.50? You seem to be arguing that because there's a chance a 1 could come up, that a ticket for that game isn't worth $0.50.
- developer2 10y ago
  "Estimate", "likelihood", "viable long enough", "realize that value", "risk", "adjusted calculation", "isn't a guarantee". These words and phrases do not inspire confidence. Also, your analogy if full of it. You make it sound like options will pay out 5/6ths of the time. Adjust your analogy to rolling a 100,000-sided die with a couple of numbers that pay out, and we might be closer to the reality. With those adjusted numbers, no you cannot have my $0.50.
ThrustVectoring 10y ago
You can take the outside view on the company. There are N companies in a comparable situation, and of those companies M of them failed. M/N is approximately what you should believe the failure risk to be.

20yrs_no_equity 10y ago

There are multiple types of value. Some of which that you often see in startups is calculable. For instance if the strike price is X and the last funding was at Y then there's an intrinsic value to the options of Y-X. If that's positive you can make an estimate of the likelihood of the company being viable long enough to realize that value and then discount that value by that amount. EVERYTHING involves risk. A risk adjusted calculation isn't a guarantee but it's also not irrelevant simply because there's risk. If I will pay you $1 for every number that comes up on the dice, unless its a 1 in which case I pay you nothing, would you ante up $0.50? You seem to be arguing that because there's a chance a 1 could come up, that a ticket for that game isn't worth $0.50.

developer2 10y ago
"Estimate", "likelihood", "viable long enough", "realize that value", "risk", "adjusted calculation", "isn't a guarantee". These words and phrases do not inspire confidence. Also, your analogy if full of it. You make it sound like options will pay out 5/6ths of the time. Adjust your analogy to rolling a 100,000-sided die with a couple of numbers that pay out, and we might be closer to the reality. With those adjusted numbers, no you cannot have my $0.50.

ThrustVectoring 10y ago

You can take the outside view on the company. There are N companies in a comparable situation, and of those companies M of them failed. M/N is approximately what you should believe the failure risk to be.