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Yes. There is a lot of confidentiality built into some of the financing terms. Befriend the CFO. A good one will say “If sell for X, you will own Y% of the co

Yes. There is a lot of confidentiality built into some of the financing terms. Befriend the CFO. A good one will say “If sell for X, you will own Y% of the company, which will be worth Z to you” and they can give another few scenarios too. “We need to clear A in valuation for employees to get anything, and at Y you get a little” Other rough heuristics: - Down rounds tend to punish employee shares. - Pivots that require large equity tend to be bad for employee shares. - Large rounds relative to valuation ($700mm for a post money valuation of a billion) make a much higher future hurdle to clear - bad for employee shares. - PE rounds tend to be worse than VCs. (VCs tend to worry more about upside, while PE firms push for downside protection) All of these general rules have many exceptions.

throwawaysea 5y ago
> Large rounds relative to valuation ($700mm for a post money valuation of a billion) make a much higher future hurdle to clear - bad for employee shares. Is that a scenario where the company has a pre money valuation of $700m and accepts $300m in funding? Why is that a bad thing? Sorry if this is a naive question. > PE rounds tend to be worse than VCs. (VCs tend to worry more about upside, while PE firms push for downside protection) Is this a binary thing or do investors exist on a spectrum? I’ve also heard another label, “growth equity”, which sounded a lot like venture capital to me. And are those rounds necessarily worse? Is it about the PE firm selecting deals to fit their risk appetite or is it more about them inserting clauses that are harmful to common share holders (not sure what the right term is but I mean regular employees).
- mathattack 5y ago
  Good questions… Scenario 1 is $300mm pre, $700mm in investment, $1bln post. If there’s are strong preference rights, you need a multi billion dollar exit for employees to get anything. PE vs VC isn’t binary, it’s a spectrum. VC firms generally don’t care about so-so outcomes. So they give up downside protection for upside. (They give up preferences to get a higher share of the company, which reduces valuation) On the flip side, PE firms are trying to make as return on every investment. So they’re ok with crazy high valuations as long as they get liquidity preferences. Which means in so-so exits they get most of the money.

throwawaysea 5y ago

> Large rounds relative to valuation ($700mm for a post money valuation of a billion) make a much higher future hurdle to clear - bad for employee shares. Is that a scenario where the company has a pre money valuation of $700m and accepts $300m in funding? Why is that a bad thing? Sorry if this is a naive question. > PE rounds tend to be worse than VCs. (VCs tend to worry more about upside, while PE firms push for downside protection) Is this a binary thing or do investors exist on a spectrum? I’ve also heard another label, “growth equity”, which sounded a lot like venture capital to me. And are those rounds necessarily worse? Is it about the PE firm selecting deals to fit their risk appetite or is it more about them inserting clauses that are harmful to common share holders (not sure what the right term is but I mean regular employees).

mathattack 5y ago
Good questions… Scenario 1 is $300mm pre, $700mm in investment, $1bln post. If there’s are strong preference rights, you need a multi billion dollar exit for employees to get anything. PE vs VC isn’t binary, it’s a spectrum. VC firms generally don’t care about so-so outcomes. So they give up downside protection for upside. (They give up preferences to get a higher share of the company, which reduces valuation) On the flip side, PE firms are trying to make as return on every investment. So they’re ok with crazy high valuations as long as they get liquidity preferences. Which means in so-so exits they get most of the money.