3 ms·

Unless you are employee #1-5, the correct approach to valuing equity is to not consider it to be worth anything. For employees 1-5, divide the numbers the CEO g

by 0xbear 9y ago

Unless you are employee #1-5, the correct approach to valuing equity is to not consider it to be worth anything. For employees 1-5, divide the numbers the CEO gives you by at least 10 to account for risk, and then demand a competitive base pay.

wpietri 9y ago
Yes and no. I agree should expect zero to come out of it, as it's a pretty low probability you'll see anything. But you still have to do the work of valuing it. First off, the people you're negotiating with see it as valuable, so it's a very bad negotiating move to say, "Keep your dumb equity and just give me cash." You'd be slightly better off just pointing to their family photo and saying, "Wow, your kids are ugly." Second, going through the work of valuing equity is necessary to see how the investors (that is, they people actually paying your salary) look at the company. Third, on the off chance you are successful, you're going to really wish you took the equity part of the negotiation seriously.
- 0xbear 9y ago
  People you’re negotiating with want you to buy their line that their equity is worth something so they could pay you less. What would you get as eg employee #10? Half a percent or less. Most startups exit under $100M, and your 0.5% turns into 0.25% due to dilution. It’s also vested over 4 years. We’re talking $250k max over 4 years, with a 5% chance you’ll get anything at all. You’d have to be seriously arithmetically challenged to take that seriously.
  - notyourday 9y ago
    People are arithmetically challenged. People also like to boast about doing good etc. Typically they realize how stupidly naive they were just around the time they no longer have ability to say "That's nice to know. So how much are you going to pay me?" The down votes on calling spade a spade demonstrate it quite well

3 ms·

Unless you are employee #1-5, the correct approach to valuing equity is to not consider it to be worth anything. For employees 1-5, divide the numbers the CEO g

by 0xbear 9y ago

wpietri 9y ago
Yes and no. I agree should expect zero to come out of it, as it's a pretty low probability you'll see anything. But you still have to do the work of valuing it. First off, the people you're negotiating with see it as valuable, so it's a very bad negotiating move to say, "Keep your dumb equity and just give me cash." You'd be slightly better off just pointing to their family photo and saying, "Wow, your kids are ugly." Second, going through the work of valuing equity is necessary to see how the investors (that is, they people actually paying your salary) look at the company. Third, on the off chance you are successful, you're going to really wish you took the equity part of the negotiation seriously.
- 0xbear 9y ago
  People you’re negotiating with want you to buy their line that their equity is worth something so they could pay you less. What would you get as eg employee #10? Half a percent or less. Most startups exit under $100M, and your 0.5% turns into 0.25% due to dilution. It’s also vested over 4 years. We’re talking $250k max over 4 years, with a 5% chance you’ll get anything at all. You’d have to be seriously arithmetically challenged to take that seriously.
  - notyourday 9y ago
    People are arithmetically challenged. People also like to boast about doing good etc. Typically they realize how stupidly naive they were just around the time they no longer have ability to say "That's nice to know. So how much are you going to pay me?" The down votes on calling spade a spade demonstrate it quite well