3 ms·

Ask HN: How can I discover the current market value of private equity?

• brudgers 11y ago
  Unless the executives strike you as people who want to make you rich, I'd take the people suggesting lower valuations more seriously. I'd also consider lower transparency as neutral at best, worrying at worst. I'd add that exercising options may not be viable in a liquidity event or if you leave the company. Good luck.
• deleted 11y ago
  [deleted]
• hdmoore 11y ago
  The pre-IPO bids for Facebook at SecondMarket were substantially higher than the original IPO (first-day trading price), less than a week before private trading was halted. Even the private market has no idea what non-public shares are worth. IMO, ask for an increase in salary, or tie the value of the stock to a conditional bonus payout. Keep in mind that even if the company goes public and the stock does well, you probably won't be able to sell for 12-18 months due to lockups, so the IPO price is less relevant to your compensation than the long-term stock price. If you are smart (and have the cash), a 83(b) election can be hugely beneficial for your taxes... unless the price at which you do the election is far above the eventual market price of the stock, in which case you are out quite a bit of money. Edit: If the company truly feels that their stock can be substituted for salary, then it shouldn't have more than a 12-month cliff for vesting.
  • CompDecision 11y ago
    > The pre-IPO bids for Facebook at SecondMarket were substantially higher than the original IPO (first-day trading price), less than a week before private trading was halted. How much higher?
    • hdmoore 11y ago
      Roughly 10%, but I forget the exact numbers. It took over a year before those private buyers could sell above cost.
• raincom 11y ago
  I joined a pre-IPO company as a contract to hire, and then decided to not join as full time. But I had buddies who joined full time. They all left the company 8 months later after the IPO: the stock price fizzled out. Just compare your salary and options, with what Google, Apple offer. And also check whether the start up is type A (Uber, Dropbox, etc), type B (box, etc) or type C (unknown potential).
  • CompDecision 11y ago
    > And also check whether the start up is type A (Uber, Dropbox, etc), type B (box, etc) or type C (unknown potential). What do these categories mean? How can I distinguish between them?
• akg_67 11y ago
  If a company has a public competitor/comparable, you may be able to use comparables to estimate value of the company. Personally, if your only reason to take the job is how quickly you can make a buck through IPO flip, you most likely will be very disappointed. seems like it might be about to IPO Seems by whom? What is the likelihood of IPO happening? Every startup I have talked to in past 4 years, claims they are going for IPO within a year or two. Not a single company among them have done the IPO yet. I personally see claims of impending IPO just a recruiting tool. Any IPO claims need to be discounted heavily. IPO is not easy to pull off! M&A is much more likely than IPO. under some circumstances, could be a large portion of my compensation What circumstances and the likelihood of those circumstances occurring? You need to list each circumstance, and its probability of happening, and the outcome. If I end up considering the equity as worth $0, like some people recommend doing for jobs in startups, taking the job would be a huge pay cut from my current position, and I would not accept the job offer. That is the baseline you should start with. Do a probabilistic analysis, the likelihood of different event, expected outcome and benefit to you. If you can't come up with a highly probable scenario, I wouldn't assume anything beyond baseline scenario to play out. The stock prices at all rounds of funding, both the most recent and all previous ones Do you have actual number of shares at each funding round or how much the company was valued at each funding round? It might be useful in valuing the company if it is really going for IPO. As investors expect M&A to be more likely event, most will have some sort of liquidation preferences attached to funding. So outcome for you in case of M&A is much more diluted. The revenue growth since the last round of funding Do you have actual revenue numbers or just claims by someone of revenue growth? If you have actual revenue numbers they will be useful in valuing the company, revenue growth not so much. Most of the time, these growth claims are inflated so will need to heavily discount such claims. Employees are telling me that internal transparency about revenue has gone down recently, which they interpret as a sign of approaching an IPO Do these employees have direct exposure/visibility to sales and revenue pipeline? How close are these employees to the pipelines where they can see the actual product, sales and revenue flow? More visibility, more believable unless they are working on convincing you of something. I have never met a Sales VP who claimed sales are not going that well. Has company retained investment banker yet or do employees see suit-types (bankers, accounting, lawyers) showing up and hanging in the office or CEO making frequent trips to Investment Banking companies and locations? These are better indicators of IPOs. The pessimistic interpretation of reduced transparency will be that company is struggling to generate revenues and revenue growth and is in trouble. For a complete picture of revenue and revenue growth you will need to talk to different internal groups that touch customers such as sales, marketing, service, account receivables, finance. High-level employees have given me their personal estimates of the value of the stock today. Some of those estimates are too low for me to want to accept the job offer, some are high enough that I would want to accept the job offer. The ones giving you the low estimates are likely to be more realistic unless personally they are impacted negatively by you taking the job. I will suggest to take some of them out of the office individually for lunch or coffee and see if you can dig in to the basis of their estimates and motives. I will ignore the ones giving high estimates, they are optimistically blind. Any employees with the midrange estimates who are closer to customers may be worth talking to.