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> For most employees that are minority shareholders, dilution is a side-effect calculation in the realm of academic trivia. Dilution is not a purposeful strateg

> For most employees that are minority shareholders, dilution is a side-effect calculation in the realm of academic trivia. Dilution is not a purposeful strategy in this situation. No, your logic would only hold for a public company with shares priced by a liquid market. For a startup, percent ownership of fully-diluted shares is the key metric. (Other secondary factors, e.g. liquidation preference are also relevant.) The strike price of the options is derived from the price that the most recent lead investor paid for the last shares purchased. This is not a market price -- the underlying value of the shares is often less. But the options are effectively worthless until they are vested and a liquidation event, usually an IPO or acquisition, occurs.

jasode 8y ago
>, percent ownership of fully-diluted shares is the key metric. We are talking about different things. I was talking about "dilution" as a verb/action that describes a _change_ from a starting % of ownership to a lesser % of ownership. The post I responded to was talking about dilution events. Employees cannot realistically make calculated strategies around dilution _events_ because they are not on the board-of-directors and can't veto the founders to not accept additional round of funding. In any case, whether the employee's shares experience 1, 3, or 4 dilution events is not something people typically care about. What they want to really know is if they get wealthier. On the other hand, if an employee is offered a # of shares as an incentive to accept a job, then yes, it's good to know if that means 0.10% or 0.05% ownership. It's smart to know if an employee is getting typical equity percentages in the industry that's commensurate with the role and timeline of the startup. (Some examples.[1]) However, that's a metric at a particular point in time and it's not a "dilution event" from the perspective of the employee. [1] https://www.holloway.com/g/equity-compensation#_there_are_no_hard_and https://www.holloway.com/g/equity-compensation#_there_are_no...

jasode 8y ago

>, percent ownership of fully-diluted shares is the key metric. We are talking about different things. I was talking about "dilution" as a verb/action that describes a _change_ from a starting % of ownership to a lesser % of ownership. The post I responded to was talking about dilution events. Employees cannot realistically make calculated strategies around dilution _events_ because they are not on the board-of-directors and can't veto the founders to not accept additional round of funding. In any case, whether the employee's shares experience 1, 3, or 4 dilution events is not something people typically care about. What they want to really know is if they get wealthier. On the other hand, if an employee is offered a # of shares as an incentive to accept a job, then yes, it's good to know if that means 0.10% or 0.05% ownership. It's smart to know if an employee is getting typical equity percentages in the industry that's commensurate with the role and timeline of the startup. (Some examples.[1]) However, that's a metric at a particular point in time and it's not a "dilution event" from the perspective of the employee. [1] https://www.holloway.com/g/equity-compensation#_there_are_no_hard_and https://www.holloway.com/g/equity-compensation#_there_are_no...