[ndonnellan]

I like the structure of the article and it's a good procedure for evaluation compensation, but my nitpick would be it could be more helpful if it included more realistic numbers.

Do 5% of startups actually reach 1B valuation in 4 years? No. Uber took 10 years to IPO. I don't know the average, but I would imagine based on a cursory search that it's closer to 7 or 8 years for highly valued companies in the past decade. And 5% seems extremely high for billion dollar IPOs.

Also, only 2 startups are compared in the NPV calculation. What about joining a BigCo / FAANG? That would really put it into context.

On the other hand, the math gets slightly better if you assume you leave after some amount of vesting. I thought danluu had a post about this, but can't find it. Staying in a startup until the bitter end is almost never the optimal choice, especially if you have inside knowledge of its progress.

https://tldroptions.io/ - This was posted a few years back, and while it doesn't give tell you the likelihood of a particular size of exit, it does help give an idea of the type of dilution and final equity value (with no discounting though).

[avyfain]

Author here, thanks for the thoughts!

> could be more helpful if it included more realistic numbers.

Any ideas on where to find these? While there's a lot of info out there on valuations most datasets have the problem of hindsight bias, especially missing data at the pre-A round.

> only 2 startups are compared in the NPV calculation. What about joining a BigCo / FAANG?

My original model was actually a FAANG vs two startup model (I left Apple) but it gets too complex to try to explain it in a post that's aimed at the stock options 101 crowd.

> the math gets slightly better if you assume you leave after some amount of vesting.

100%, although that's tough to model without just adding an arbitrary cutoff.

> https://tldroptions.io/

Thanks, I did not know about this tool!

[ndonnellan]

Thanks for the reply! Sorry I don't have any great sources off the top of my head. It makes sense that you'd want to restrict the scope of the article to make it more understandable.

I've only been part of one startup, and it went nowhere, but it's very common (ubiquitous?) for prospective employees to be sold the "if we IPO for $1xB" line when that likelihood is laughably small; hence my suggestion to lower the expectations with some lower numbers.

But props for getting this all down!