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I think the main problem (and you are pointing it out) is that most people have no idea how startup compensation works. If they get 0.5% of stock as an early em

by ptero 9y ago

I think the main problem (and you are pointing it out) is that most people have no idea how startup compensation works. If they get 0.5% of stock as an early employee and 5 years later the company gets acquired at 100M valuation they think they will end up with 500k. I suspect that this leads to irrational expectations and agreeing to work for much lower salary. It would be great if someone could share any statistics on what, say 1% at seed money ends up at 100M valuation (or pick another metric). That can give early employees a data point for sanity checks on their comp.

madamelic 9y ago
Yeah, I feel like getting a full picture of the health and investment of a company you are working at would be nice. At my last company, they would announce how much we had in the bank and how long the runway was at every all-hands and other stats about investments. Understanding the acquistion priority / leverage (I forget the phrase for it. Basically how much the investors have to make before the money trickles down), how much your potential shares are diluting, etc are important. Unfortunately I think it is better for companies to keep this info close to the chest, especially in badly-run companies or green-behind-the-ears founders (who agree to bad terms because of inexperience)
- ptero 9y ago
  That's why I would like to see a statistical data point for a successful startup (say, limited to 100M+ valuations). Yes, companies are different; some may need to raise more and some less, but if I knew how much, on average, 1% stock at seed translates at 100M buyout it would be a valuable data point.
  - madamelic 9y ago
    Definitely. Yours is pre-computed, my suggestion / comment was just about giving raw stats for employees to compute and verify themselves. I guess yours is more palatable to give out than giving the raw stats that can be leaked.
- clairity 9y ago
  liquidation preferences, or rachets as they're sometimes called. founders should be very wary of such things. (other) investment terms should already account for the investment risk, otherwise the deal is mispriced and should be reworked to remove rachets.

by ptero 9y ago

madamelic 9y ago

Yeah, I feel like getting a full picture of the health and investment of a company you are working at would be nice. At my last company, they would announce how much we had in the bank and how long the runway was at every all-hands and other stats about investments. Understanding the acquistion priority / leverage (I forget the phrase for it. Basically how much the investors have to make before the money trickles down), how much your potential shares are diluting, etc are important. Unfortunately I think it is better for companies to keep this info close to the chest, especially in badly-run companies or green-behind-the-ears founders (who agree to bad terms because of inexperience)

ptero 9y ago
That's why I would like to see a statistical data point for a successful startup (say, limited to 100M+ valuations). Yes, companies are different; some may need to raise more and some less, but if I knew how much, on average, 1% stock at seed translates at 100M buyout it would be a valuable data point.
- madamelic 9y ago
  Definitely. Yours is pre-computed, my suggestion / comment was just about giving raw stats for employees to compute and verify themselves. I guess yours is more palatable to give out than giving the raw stats that can be leaked.
clairity 9y ago
liquidation preferences, or rachets as they're sometimes called. founders should be very wary of such things. (other) investment terms should already account for the investment risk, otherwise the deal is mispriced and should be reworked to remove rachets.