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> If the company doubles in value and I have the same amount of money, then what's the point of getting options instead of USD? Huh? You should compare the cur

> If the company doubles in value and I have the same amount of money, then what's the point of getting options instead of USD? Huh? You should compare the current value of the options to their value at the last fundraising round, not between pre- and post-money in the same round. The doubling in value happen between (e.g.) the Series A raise and the Series B raise, not at the time of the Series B raise, and when you compare the value of your options between the raises that's when you'll see the increase in value. For example, imagine you have 10% of the company and after the Series A raise the company is valued at $1m, so your share is $100k. Now you go and work for two years and increase the value of the company to $20m (pre-money). Your 10% is worth $2m now. If the company raises $5m for 20% ($25m post-money) in a Series B you now have 8.3% of the company (you were diluted) but your 8.3% is still worth $2m. The stock option reward happens while you're building the company.

ForHackernews 6y ago
If it's a privately held company, then I think you could reasonably argue that the "pre-money" valuation is illusory. There's no market price, and the company is only worth whatever investors can be convinced to pay for it. To take your example: my hypothetical 10% isn't worth $2m -- it's worth an unknown amount (one hopes more than the $100k it started at). Only after somebody is willing to pay $5m for 20% of the company can one realistically say what my (now 8.2%) shares are worth.
- mason55 6y ago
  Ah, in the context of this conversation "pre-money" means the value of the company before taking into account the cash raised in the current round. It doesn't mean a company that's never taken any outside investment. It's perfectly reasonable to talk about a pre-money valuation that has a market price. If you raise $20m for 20% of the company then you can say the company had a post-money valuation of $100m or a pre-money valuation of $80m, and both of those numbers are market-based. The poster I was replying to seemed to think that the act of raising money is what should increase the value of your shares, which is not the case. See here for more info on how the terms are used: https://www.investopedia.com/ask/answers/difference-between-premoney-and-postmoney/ https://www.investopedia.com/ask/answers/difference-between-...

ForHackernews 6y ago

If it's a privately held company, then I think you could reasonably argue that the "pre-money" valuation is illusory. There's no market price, and the company is only worth whatever investors can be convinced to pay for it. To take your example: my hypothetical 10% isn't worth $2m -- it's worth an unknown amount (one hopes more than the $100k it started at). Only after somebody is willing to pay $5m for 20% of the company can one realistically say what my (now 8.2%) shares are worth.

mason55 6y ago
Ah, in the context of this conversation "pre-money" means the value of the company before taking into account the cash raised in the current round. It doesn't mean a company that's never taken any outside investment. It's perfectly reasonable to talk about a pre-money valuation that has a market price. If you raise $20m for 20% of the company then you can say the company had a post-money valuation of $100m or a pre-money valuation of $80m, and both of those numbers are market-based. The poster I was replying to seemed to think that the act of raising money is what should increase the value of your shares, which is not the case. See here for more info on how the terms are used: https://www.investopedia.com/ask/answers/difference-between-premoney-and-postmoney/ https://www.investopedia.com/ask/answers/difference-between-...