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comments
At the end of the day, your ownership % won’t matter. It’s a P*Q exercise.
It comes down to the unit of account and calculation based on the unit of account. Which for most VCs are going to look at the specific shares and share counts they own (the same is true for employees/founders).
When a new round is raised at X dollars per share, we arrive at the post-money value which is equal to $X*Total Shares Outstanding (including all existing shares and options plus new shares).
This continues on and on for each round. Typically a company will value the RSUs or Options via a 3rd party to arrive at their value. These are then issued that value. For RSUs if they’re valued at $20/share and you have 100k or RSUs, you received 5,000 RSUs. If you revived options, the strike price is the set as the value and and you benefit in any value accretion (value of said options are subject to assumptions used and perspective).
When that new round comes in at $Y/share (if an up round), from an investor of the X round perspective , I know that I have some value accretion. To the extent is subject to assumptions but it’s fair to say it’s between $X and $Y/ share.
The same value accretion occurs with common, RSUs and options but to a lesser extent (lower on the waterfall).
I would bear caution of applying a new round’s share price to your RSUs or option as there is a lot that needs to happen for that value to reach those shares.
Another way to look at it is a slice of pie, your slice of the pice might % be getting smaller but the pie is getting bigger and the area of your slice is increasing.
Absolutely selective stock awards are made. If you leave the company after 1 year and everyone else keeps growing the company you’d want a mechanism to make sure the people who stay get kept whole.
In practice if you stay and do a good job you get more stock that makes the dilution less impactful to your overall ownership of the business.
Without this system someone joining early on and leaving means you have a percentage of the company you’ll never be able to award to new people who do much more in the long run.
Everyone just negotiates understanding you will get diluted with every new round, not really sure what the point is? Even if you did find some founder desperate enough to agree with it, they are just going to give you less non-dilutable equity to net out the same.
Edit: taking less in non-dilutable shares makes total sense to me. After all you expect company to grow.