Comparing pre-ipo to public company stock?

Mar 4, 2016 17 Comments

What's the best way to think of a pre-ipo to a public company RSU offer?

Say G is offering 750k of RSU, what is a good equivalent for A list pre-ipo companies (Airbnb, uber, Pinterest, Slack)?

How should one think of it? What multiple should be considered?

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TOP 17 Comments
  • Google
    Damnit

    Go to company page Google

    Damnit
    Well your CEO rejected the opportunity to buy Slack so I think their risk factor is high/low depending on what you think happens when a big company buys a startup. Uber is highly valued right now with low margins. I would think chances of them getting hit with lower market cap post ipo is definitely there. Airbnb would be my best bet among three
    Mar 5, 2016 4
  • Slack: Good product but highly valued. Not sure of the upside from here. Don't know if going public is in the cards any time soon.

    AirBnB: Pretty solid business model and on the mature side of the unicorns. Haven't followed their growth lately but I don't think there will be surprises here. Maybe the safest bet of the 3 but also the least growth upside.

    Uber: Big question mark in my opinion. Con: Growth strategy is a race to the bottom, pricing-wise. Pro: They're winning in many markets and there's a network effect. They're burning through lots of cash. I don't think the other businesses will be as big (eg ubereats). Then again, when I first heard about them I was skeptical and they've proven to be quite something since then. I think Uber has limited upside from here as wel.
    Mar 5, 2016 2
  • Google
    Damnit

    Go to company page Google

    Damnit
    I d take 2.5x for uber and will be happy with 1.5x for airbnb. Just based on how risky I think the evaluations will likely drop if they go the ipo route ever
    Mar 7, 2016 1
  • Hmm. You could come up with an expected value based on the probability that you're able to liquidate stock. Id take into account the opportunity cost of working at a place that's public.

    So, for example, if you think there's a 50% chance of liquidation, then factor risk at 2x. If you could get 500k from a public company, then that would be translate to 1M at a pre-ipo one.

    The difficulty is that the younger the company is, the harder it is to guess that probability with any success. Also, it's harder to predict the potential value of a young company.
    Mar 4, 2016 1
  • Apples to oranges. One has immediate but unpredictable market value (alphabet is unlikely to go out of business). The other is simply a bet with 70% chance of being worthless, 20% chance of moderate success, and a 10% chance of wild success (based on average startup outcomes).
    Mar 4, 2016 1