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Sure, but dilution without representation can be a big risk for a regular employee. You might get a smaller slice of a bigger pie, but it may also represents a

Sure, but dilution without representation can be a big risk for a regular employee. You might get a smaller slice of a bigger pie, but it may also represents a smaller real-world valuation if you get diluted too far. If you have no say over how much you're diluted (like most employees), you could be diluted away to nothing. You have no control. So you must calculate worth accordingly. Is everyone to get diluted equally. No? Well then, calculate worth accordingly. In addition, I thought the pie getting bigger was the WHOLE POINT OF HAVING THE SHARES TO BEGIN WITH.

jasode 9y ago
>You might get a smaller slice of a bigger pie, but it may also represents a smaller real-world valuation if you get diluted too far. Show example math of how someone could get "diluted too far" resulting in less total value (shares x price) after an investment round that prices the company higher than before. If the total value was truly less, it means it was "down round" which is a different beast. >, you could be diluted away to nothing. Show how it is mathematically possible to dilute employee's 1% ownership in to 0% without illegal tricks. When Mark Zuckerberg tried to dilute Eduardo (without also diluting the other owners), he tried to hide the reduced % via a newly created company. He got sued for the financial deception and lost.
- gnopgnip 9y ago
  It is a lot different if some of the founders/past investors have anti dilution clauses
- renlo 9y ago
  I'm somewhat new to this topic (and therefore might not understand correctly) but another user, 'oillio', made a response in a different thread [0] which could explain 'getting diluted away to nothing', for example, an investor invests money causing dilution, the company squanders the money or uses it on something that doesn't positively affect the company trajectory. You now own a smaller slice of a pie which is the same size as it was before. Using his example, if you estimate the value of a company to be 100M and estimate 10 years until IPO, if the investment doesn't raise the value of the company at the time of the IPO in 10 years then the dilution is not good for the employee because the pie is the same size (100M) but his/her shares have been diluted. Seems like it's pretty difficult to estimate the value of the company in 10 years or the IPO date though which is probably why people just use the amount invested to estimate the value of the company. [0] https://news.ycombinator.com/item?id=14510483 https://news.ycombinator.com/item?id=14510483
kbenson 9y ago
> Sure, but dilution without representation can be a big risk for a regular employee. Well, it's a big risk to everyone that doesn't get voting rights, right? Not all investors get voting rights, do they? In some way, an employee sits between a non-voting investor and a voting investor. They don't get to vote, but they do have some control over the outcome of the company (ranging from small to large, depending on the number of employees and responsibilities of the person in question).

jasode 9y ago

>You might get a smaller slice of a bigger pie, but it may also represents a smaller real-world valuation if you get diluted too far. Show example math of how someone could get "diluted too far" resulting in less total value (shares x price) after an investment round that prices the company higher than before. If the total value was truly less, it means it was "down round" which is a different beast. >, you could be diluted away to nothing. Show how it is mathematically possible to dilute employee's 1% ownership in to 0% without illegal tricks. When Mark Zuckerberg tried to dilute Eduardo (without also diluting the other owners), he tried to hide the reduced % via a newly created company. He got sued for the financial deception and lost.

gnopgnip 9y ago
It is a lot different if some of the founders/past investors have anti dilution clauses
renlo 9y ago
I'm somewhat new to this topic (and therefore might not understand correctly) but another user, 'oillio', made a response in a different thread [0] which could explain 'getting diluted away to nothing', for example, an investor invests money causing dilution, the company squanders the money or uses it on something that doesn't positively affect the company trajectory. You now own a smaller slice of a pie which is the same size as it was before. Using his example, if you estimate the value of a company to be 100M and estimate 10 years until IPO, if the investment doesn't raise the value of the company at the time of the IPO in 10 years then the dilution is not good for the employee because the pie is the same size (100M) but his/her shares have been diluted. Seems like it's pretty difficult to estimate the value of the company in 10 years or the IPO date though which is probably why people just use the amount invested to estimate the value of the company. [0] https://news.ycombinator.com/item?id=14510483 https://news.ycombinator.com/item?id=14510483

kbenson 9y ago

> Sure, but dilution without representation can be a big risk for a regular employee. Well, it's a big risk to everyone that doesn't get voting rights, right? Not all investors get voting rights, do they? In some way, an employee sits between a non-voting investor and a voting investor. They don't get to vote, but they do have some control over the outcome of the company (ranging from small to large, depending on the number of employees and responsibilities of the person in question).