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The expected value of 0.5% of the equity in that startup should be 0.5% of the valuation. That said, not everyone has the savings or investments to offset that

The expected value of 0.5% of the equity in that startup should be 0.5% of the valuation. That said, not everyone has the savings or investments to offset that level of risk. For someone with a "low" risk-tolerance, that value drops dramatically. Remember risk in our (assumed rational) finance market is as much tied to your ability to have enough liquidity as it is to have a positive outcome.

arbuge 14y ago
Pre-exit valuations are the opinions of just one - a few investors though. Hard data from previous exits is a different thing altogether.
khuey 14y ago
In other words, money has a non-linear utility function. People often forget that when reasoning about financial matters.