3 ms·

Yes, EV. I certainly think tech entrepreneurs go into a startup opportunity impassioned by their ideas, but knowing they could IPO or exit at some point in the

by anonu 6y ago

Yes, EV. I certainly think tech entrepreneurs go into a startup opportunity impassioned by their ideas, but knowing they could IPO or exit at some point in the future for a sizeable amount of cash is certainly a motivating factor. EV = Probability * Outcome Probability is very low of an IPO outcome - but EV is probably still higher than FANG work.

whimsicalism 6y ago
Yeah, I don't think that is true.
- medvezhenok 6y ago
  Around 1% of seed-funded companies go on to become unicorns (>1B valuation). Total market value of unicorns ~$2T (~600 unicorns). So average unicorn valuation ~3.3B USD. Let's say you're the founder and your [ultimately diluted] share of the company is 10%. You have a 10Y runway. Your EV in startup case is 330M (10% of 3.3B) * 1% chance of success = $3.3M or $330K USD per year. This is only counting the extreme (unicorn cases) and will obviously vary with equity percentages. https://news.crunchbase.com/news/private-unicorn-board-now-above-600-companies-valued-at-2t/ https://news.crunchbase.com/news/private-unicorn-board-now-a...
  - whimsicalism 6y ago
    What percent of entrepreneurs create seed-funded companies? $3.3m in NW is 100% beatable in FANG.
    - medvezhenok 6y ago
      Sure - I agree; that was only the slice of the pie attributable to the extreme success (1%). There's also exits which are non-unicorn but non-trivial which probably bump that number up quite a bit. It's a tricky problem in the general case because the skills that would allow you to capture a high compensation in FAANG probably correlate with the skills that would lead to a successful startup (not perfectly, but somewhat), so the better your options in FAANG the better your potential outcome via startup (with much higher variance).
cupofcoffee 6y ago
Your intuition is wrong. Suppose, 10^-9 odds of a startup making 10 billion. Let's assume the other terms are negligible. E_startup = ... + 10^-9 * 10^11 = 100$ E_faang = 10^-1 * 10^5 + 10-2 * 10^6 + ... >= 10^4
- anonu 6y ago
  > 10^-9 odds of a startup making 10 billion Intuitively those numbers feel wrong. theres 7bn people on this planet - and only a very tiny proportion might become tech entrepreneurs. So I think your "1 in a billion" chance of being successful is a bit high. Also, who said $10bn was successful? It is just 1 outcome of many...

by anonu 6y ago

whimsicalism 6y ago

Yeah, I don't think that is true.

medvezhenok 6y ago
Around 1% of seed-funded companies go on to become unicorns (>1B valuation). Total market value of unicorns ~$2T (~600 unicorns). So average unicorn valuation ~3.3B USD. Let's say you're the founder and your [ultimately diluted] share of the company is 10%. You have a 10Y runway. Your EV in startup case is 330M (10% of 3.3B) * 1% chance of success = $3.3M or $330K USD per year. This is only counting the extreme (unicorn cases) and will obviously vary with equity percentages. https://news.crunchbase.com/news/private-unicorn-board-now-above-600-companies-valued-at-2t/ https://news.crunchbase.com/news/private-unicorn-board-now-a...
- whimsicalism 6y ago
  What percent of entrepreneurs create seed-funded companies? $3.3m in NW is 100% beatable in FANG.
  - medvezhenok 6y ago
    Sure - I agree; that was only the slice of the pie attributable to the extreme success (1%). There's also exits which are non-unicorn but non-trivial which probably bump that number up quite a bit. It's a tricky problem in the general case because the skills that would allow you to capture a high compensation in FAANG probably correlate with the skills that would lead to a successful startup (not perfectly, but somewhat), so the better your options in FAANG the better your potential outcome via startup (with much higher variance).

cupofcoffee 6y ago

Your intuition is wrong. Suppose, 10^-9 odds of a startup making 10 billion. Let's assume the other terms are negligible. E_startup = ... + 10^-9 * 10^11 = 100$ E_faang = 10^-1 * 10^5 + 10-2 * 10^6 + ... >= 10^4

anonu 6y ago
> 10^-9 odds of a startup making 10 billion Intuitively those numbers feel wrong. theres 7bn people on this planet - and only a very tiny proportion might become tech entrepreneurs. So I think your "1 in a billion" chance of being successful is a bit high. Also, who said $10bn was successful? It is just 1 outcome of many...