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Great concept, and really helpful for most non-legal savvy early employees. I noticed that an employee getting 1% options in a seed stage company doesn’t seem

Great concept, and really helpful for most non-legal savvy early employees. I noticed that an employee getting 1% options in a seed stage company doesn’t seem to get anything unless the exit is > $35M. Not sure that applies to most seed stage companies. Employees of a company I know well would start seeing proceeds after an exit >$5M.

trhway 8y ago
A highly ratcheted round can easily change that.
jasode 8y ago
>doesn’t seem to get anything unless the exit is > $35M. It's because their model assumes "$41 million" was invested into the hypothetical seed company over 4 rounds. Therefore, the company has to exit for more than $41m for the employees' common stock to be worth something. You have to click on the "How We Guesstimate" button to see their underlying financial assumptions. In my opinion, this type of "what if?" calculator would be easier to understand if they explicitly showed the intermediate calculation steps in the user interface. A more obvious "show your work" would educate people and preemptively answer questions such as yours about why a $5 million exit nets $0 for employees.
- nitrogen 8y ago
  Seconded. A user-friendly display of intermediate steps would be great for educational purposes.
  - bethly 8y ago
    Building this tool we purposefully steered away from education. We found that the users we talked to, people considering startup jobs who didn't know how to value options, were frequently overwhelmed and discouraged by tools with more educational content. This tool might spark someone's curiosity, but we purposefully built it for a group that didn't want to have to learn about venture finance and still wanted to work at a startup.
    - mikekij 8y ago
      So then I guess my feedback is that exits between $10M and $100M (which are the bulk of >$0 exits for venture backed software companies) should assume the company has only raised ~30% of the exit amount. e.g. A $50M exit for a company that has raised $10M can still make some money for everyone. But I agree with the premise that the UI for this tool has to be super simple. Thanks for building this!
- TuringNYC 8y ago
  Yes, and that is with a very generous assumption of no class-preferences for investors. https://www.entrepreneur.com/article/229615 https://www.entrepreneur.com/article/229615
bethly 8y ago
Only if it exits at that seed stage: if it raises more money, the number goes up. If the company makes it to Series C+, the number is probably going to be higher than $35M. Which is what taking the average does: for about half of exits that number will be higher and for about half the number will be lower. Rather than complicating the model here to try to illustrate the difference between exiting at this stage versus raising another round, we went with an approach that demonstrates how preferences work. Even if the number is lower for a Seed company that exits at Series A or higher if it exits at Series C, there is still a number under which you'll get nothing even if the company has a profitable exit.

trhway 8y ago

A highly ratcheted round can easily change that.

jasode 8y ago

>doesn’t seem to get anything unless the exit is > $35M. It's because their model assumes "$41 million" was invested into the hypothetical seed company over 4 rounds. Therefore, the company has to exit for more than $41m for the employees' common stock to be worth something. You have to click on the "How We Guesstimate" button to see their underlying financial assumptions. In my opinion, this type of "what if?" calculator would be easier to understand if they explicitly showed the intermediate calculation steps in the user interface. A more obvious "show your work" would educate people and preemptively answer questions such as yours about why a $5 million exit nets $0 for employees.

nitrogen 8y ago
Seconded. A user-friendly display of intermediate steps would be great for educational purposes.
- bethly 8y ago
  Building this tool we purposefully steered away from education. We found that the users we talked to, people considering startup jobs who didn't know how to value options, were frequently overwhelmed and discouraged by tools with more educational content. This tool might spark someone's curiosity, but we purposefully built it for a group that didn't want to have to learn about venture finance and still wanted to work at a startup.
  - mikekij 8y ago
    So then I guess my feedback is that exits between $10M and $100M (which are the bulk of >$0 exits for venture backed software companies) should assume the company has only raised ~30% of the exit amount. e.g. A $50M exit for a company that has raised $10M can still make some money for everyone. But I agree with the premise that the UI for this tool has to be super simple. Thanks for building this!
TuringNYC 8y ago
Yes, and that is with a very generous assumption of no class-preferences for investors. https://www.entrepreneur.com/article/229615 https://www.entrepreneur.com/article/229615

bethly 8y ago

Only if it exits at that seed stage: if it raises more money, the number goes up. If the company makes it to Series C+, the number is probably going to be higher than $35M. Which is what taking the average does: for about half of exits that number will be higher and for about half the number will be lower. Rather than complicating the model here to try to illustrate the difference between exiting at this stage versus raising another round, we went with an approach that demonstrates how preferences work. Even if the number is lower for a Seed company that exits at Series A or higher if it exits at Series C, there is still a number under which you'll get nothing even if the company has a profitable exit.