equity dilution in startup

Facebook pikachu_
Nov 16 11 Comments

i will be offered a role in a startup. They are in seed with 3mil+ in funding. i will be the #5 employee and most likely they will give 5%.
how much should I ask.

Also, with every round of funding the percentage will dilute. I dont know how the math works and is it worth even taking the risk.

Just a thought, if after series A they are acquired, my percentage would be around 3.65% and assuming acquistion of 35mil, I would making around 800k which I can already do it if I stay at FB for 3 years.

Any insights or experience appreciated

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TOP 11 Comments
  • Facebook TCorGTF0
    the wisest thing anyones ever told me. ive done 5 early start ups as both founder and early emp. heres how to evaluate. take # of shares divide by percentage, multiply by chance of success, divide by years to exit and finally multiply by zero. thats how much the non cash part is worth
    Nov 16 4
    • Google
      4y😭

      Google

      PRE
      Microsoft
      4y😭more
      Finally multiply by 0. That's the important part.
      Nov 16
    • Facebook pikachu_
      OP
      If we go by that rule, then one would never work for a startup, even if you believe it would succeed
      Nov 16
    • Facebook TCorGTF0
      thats only true if you care about comp
      Nov 17
    • Facebook TCorGTF0
      startups provide learning you cant get elsewhere. i never said they had nothing to provide
      Nov 17
  • Google / Product thxb12
    Kind of agree with the pessimistic view of startup equity... Go work there if you think it's an interesting challenge or you love the team. Otherwise, if you are just interested in TC, you're better off (from an EV perspective) to work at FANG.
    Nov 16 5
    • Facebook pikachu_
      OP
      It’s very difficult to go above E5 in Facebook. Also I don’t understand the perspective that you should not work for tc in a startup. If that were true then none of the early employee will make money
      Nov 16
    • Facebook TCorGTF0
      the expected value of your stock is 0. and yes early employee ratio of work to payout is slim compared to founder. by your logic then if every early employee makes fu money then every founder becomes billionaire?
      Nov 18
    • Facebook pikachu_
      OP
      I am not saying everyone becomes billionaires. I am saying if startup does great then at least early employees become multimillionaires including the founders
      Nov 18
    • Facebook TCorGTF0
      you need the stars and heavens to align for this and without knowing your company this is less than 1% chance.
      1. founders arent selfish assholes and dont screw you both during offer and future rounds of funding and during exit
      2. start actually becomes great - at least uber lyft level
      3. you actually exit
      Nov 19
    • Facebook TCorGTF0
      the reason above are why the expected value of equity is zero
      Nov 19

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