4 ms·

A little over halfway through the author mentions a billion dollar sale netting each of three founders only $300,000. Am I misunderstanding, or is that a mistak

• czbond 12y ago
  That line threw me off as well. I think he was switching thoughts between sentences. He mentions Billion dollar companies,and then I believe he's saying "for any company exit [not Billion exit] - your average gain is $300k"
• saalweachter 12y ago
  Expected value is the key phrase. So 0.00006% of the time you start a billion dollar company and take home $300MM. 67% of the time you fail and take home $0. The rest of the time you fall somewhere in between, and so your expected value is $300,000. Divide that into an average of 4 years and your expected value is $75,000. So if you're perfectly rational, you should be willing to work as an employee with no equity for an extra $80,000 over whatever you'd pay yourself as a startup founder, because your expected value is higher.
  • robryk 12y ago
    If you're optimizing for the expected value. One can also optimize for the greatest chance to have more than X$ for some X.
    • saalweachter 12y ago
      If your goal is to make at least $100MM, and your chance of founding a billion dollar company is 0.00006%, then you should go buy a thousand lottery tickets the next time the powerball is up in the hundred millions. Your odds will be higher and you'll find out the next day you lost.
  • sopooneo 12y ago
    Okay, thanks. I hadn't realized he was talking expected value at that point, but your figures clear it up.