I wish folks would actually talk about the real returns on startup equity more often. I understand the urge to talk about it like a "lottery ticket". But it's an investment like anything else. And you should gather info about it to decide if it's an investment you want to make. https://twitter.com/zadr/status/1013106779587301379 …
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Replying to @polotek
one statistic I’m interested in is — what % of these startups do non-executive employees typically end up owning (as a group)? 5%? 10%? 30%
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My Fermi estimate is 8% +/- 2%, with the assumptions a) Silicon Valley norm of 20% reserved for employee option pool b) a few percentage points of that (2~6%) went to executive hires, with the biggest contributor being non-founder CEO if that happens c) diluted to about half
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I think that the standard HN/etc discourse of options doesn't realize the magnitude of the discontinuity which happens between "Oh we're a bunch of kids doing the startup thing" and "Company X seems like reasonable shot on the next big thing."
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e.g. For the first employee of a company which might or might not make it into YC, I feel like "lottery ticket" is approximately accurate, but there exist N companies which will hire material numbers of engineers this year and produce lifechanging outcomes for them.
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Is that a useful statement though? There are N number of winning lottery tickets that will produce life changing outcomes as well. The question is what are the numbers on that distribution? And is it a smarter investment than other things you could go with your time and labor?
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It is my perception that the probability of life-changing outcomes goes from 0.002% (I have a rationale for that number; it isn't "arbitrarily low number") to ~80% for things that are both sold as "equity in a promising but risky startup." Material = "We hire 100+ eng here / yr"
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I would love to see a blog based on Twitter thread!
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Dang it now I might have to write that.
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