3 ms·

> There's also the (sometimes) predatory capital structure. Whatever you call this sort of thing (predatory or otherwise), obviously it goes into your EV estim

by ska 5y ago

> There's also the (sometimes) predatory capital structure. Whatever you call this sort of thing (predatory or otherwise), obviously it goes into your EV estimate/swag. FWIW my answer to this stuff is never take a salary so low you would be unhappy if it tanks, which isn't the same thing as valuing equity at zero.

H8crilA 5y ago
Ok but my point is: Understand that the "shares" that you get may end up being worth exactly $0, while the "shares" of the venture capital investor may end up being worth substantially > $0, because they sometimes are different things. Just saying "oh yeah factor that in" doesn't help anyone who may not even know there could be a whole different class of "shares", as well as other corporate liabilities. Relevant XKCD: https://xkcd.com/793/ https://xkcd.com/793/
- ska 5y ago
  > Just saying "oh yeah factor that in" doesn't help anyone who may not even know there could be a whole different class of "shares", as well as other corporate liabilities. By all means educate yourself, but this information has been out there for decades at this point. I'm in no way advocating you saying "Oh, they gave me 1% on day 1, that means I'll get 5mm on a 500mm exit". You need to think about impacts of dilution and preference at minimum, but there's data on this. And note I never claimed it would be accurate, the error bars are huge. But it's obviously more accurate than just setting it equal to zero. Which people really don't do, by observed preference. Since we are in the weeds now, my actual advice on seed or earlier equity is mostly judge it as a measure of commitment and interest.
  - H8crilA 5y ago
    Of course it has. The capital markets have not changed much since the 1600s Amsterdam. And yet it's very easy to find older engineers on HN that have some horror option exercise tax stories from the dotcom era. Heck, the same happened with trading Bitcoin at the 2017 top to a lot of people. And I'm sure there's going to be a lot more. And at the moment the very top comment in this thread is about someone who got $100k, same as everyone, except the founders who somehow got out with 8 figures. My point is to realize you're actually significantly disadvantaged. But i guess the youth has to do all the same mistakes over and over again, that's how the system goes forward. I should be cheering from the sidelines like most people do, it seems more fun :)
    - ska 5y ago
      > My point is to realize you're actually significantly disadvantaged. That's true, but it shouldn't lead to valuing equity at $0. Before worrying about the impact of cap table structure you should also understand how and when they get that way - it really shouldn't be at the beginning (and if they won't show you some details then, walk away).
      - deleted 5y ago
        [deleted]

by ska 5y ago

H8crilA 5y ago

Ok but my point is: Understand that the "shares" that you get may end up being worth exactly $0, while the "shares" of the venture capital investor may end up being worth substantially > $0, because they sometimes are different things. Just saying "oh yeah factor that in" doesn't help anyone who may not even know there could be a whole different class of "shares", as well as other corporate liabilities. Relevant XKCD: https://xkcd.com/793/ https://xkcd.com/793/

ska 5y ago
> Just saying "oh yeah factor that in" doesn't help anyone who may not even know there could be a whole different class of "shares", as well as other corporate liabilities. By all means educate yourself, but this information has been out there for decades at this point. I'm in no way advocating you saying "Oh, they gave me 1% on day 1, that means I'll get 5mm on a 500mm exit". You need to think about impacts of dilution and preference at minimum, but there's data on this. And note I never claimed it would be accurate, the error bars are huge. But it's obviously more accurate than just setting it equal to zero. Which people really don't do, by observed preference. Since we are in the weeds now, my actual advice on seed or earlier equity is mostly judge it as a measure of commitment and interest.
- H8crilA 5y ago
  Of course it has. The capital markets have not changed much since the 1600s Amsterdam. And yet it's very easy to find older engineers on HN that have some horror option exercise tax stories from the dotcom era. Heck, the same happened with trading Bitcoin at the 2017 top to a lot of people. And I'm sure there's going to be a lot more. And at the moment the very top comment in this thread is about someone who got $100k, same as everyone, except the founders who somehow got out with 8 figures. My point is to realize you're actually significantly disadvantaged. But i guess the youth has to do all the same mistakes over and over again, that's how the system goes forward. I should be cheering from the sidelines like most people do, it seems more fun :)
  - ska 5y ago
    > My point is to realize you're actually significantly disadvantaged. That's true, but it shouldn't lead to valuing equity at $0. Before worrying about the impact of cap table structure you should also understand how and when they get that way - it really shouldn't be at the beginning (and if they won't show you some details then, walk away).
    - deleted 5y ago
      [deleted]