29 ms·
Have you actually modeled out the potential payouts? How did you choose the 1% number (percent of their equity that each founder contributes) as well as the po
by mauriziocalo 6y ago
Have you actually modeled out the potential payouts?
How did you choose the 1% number (percent of their equity that each founder contributes) as well as the pool size of < 25?
My quick back-of-the-envelope calculation:
Expected payout to each member would be:
1% * avg_valuation_of_companies_in_pool * avg_percent_ownership_at_exit
Assuming an average valuation (in the literal sense, total exit value of all co's in the pool / number of co's) of $100M [2] and assuming that the founders own roughly 15% at exit, the expected payout would be only $150K excluding taxes, which seems quite low.
[1] Modeling should be somewhat doable leveraging public data. For example, you can use YC company data in https://ycombinator.com/topcompanies https://ycombinator.com/topcompanies https://ycombinator.com/companies https://ycombinator.com/companies and simulate what the payouts would be if you were to choose 25 companies from a given batch at random.
[2] $100M is likely in the right ballpark. According to https://www.ycombinator.com/ https://www.ycombinator.com/ :
> Since 2005, we've funded over 2,000 startups.
> Our companies have a combined valuation of over $100B.
the average valuation of YC co's would be ~$50M; if you exclude half of those that are in recent batches (haven't had time to realize their value and don't really contribute towards the $100B total) it might be closer to $100M.
Under a FounderPool model, an example of this would be a pool of 20 co's in which 2 companies end up exiting for $1B each and the rest essentially $0.
- manojdv 6y ago1) Pools sizes are not fixed number and more over, founders can invite other companies to existing pool on a rolling basis 2) We have done modeling, obviously selection is the top determinant of payouts (20% avg. success rate vs 40% success rate) but bigger pool sizes ensure potential for a breakout company. Happy to share if interested, contact us at contact at founderpools.com
- mauriziocalo 6y ago> bigger pool sizes ensure potential for a breakout company Yes, but the payout gets distributed among a larger number of companies. Increasing the pool size lowers the variance, but the expected value remains the same. Lower variance might be desirable for some people (more predictability -- at the limit it's as if you're investing 1% of your equity into an "ETF" of early-stage startups), whereas some people might prefer higher variance (higher potential upside if they join a pool with the next Stripe). My concern is that if founders contribute 1% of their equity (not 1% of the entire company at exit), the expected value itself is quite small -- on the order of $150K under reasonably optimistic assumptions -- for something like FounderPool to make sense. On the flipside, increasing the 1% by an order of magnitude might make more sense from a utility maximization point of view, but even less sense from an emotional standpoint.
- imtringued 6y agoWhy would ownership at exit matter? If the founder only has 15% ownership then he will still have to give up 1% not 0.15% of total equity. This means the founder will be left with 14% equity.
- mauriziocalo 6y agoThe FounderPool website specifically mentions: > You contribute 1% of your equity into your pool. My understanding is that if a founder owns 30% (say) of the company when they join the pool, they would contribute towards the pool a number of shares corresponding to 1% of that 30%, i.e. 0.3% of the company. Which will presumably get further diluted by the time the company exits. Having founders contribute X% of their equity at the time they join the pool is more reasonable from a practical execution standpoint than having founders contribute X% of the company the time of exit.
- csentropy 6y agoAgree. Founders contribute a percentage of the equity they would fully own, if fully vested to the pool, not a fixed percentage of the equity of the company.