SalaryOrEquity: A simple tool to help evaluate equity

You're making a mistake on premoney, money & post money. You're calculating dilution as Money/Pre-money it should be money/(money+pre-money).

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8yr ago

matt wallaert

SalaryOrEquity

Maker

@resh Let me go take a look...while this got uploaded recently, it is actually older and been awhile since I've looked at the math.

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8yr ago

matt wallaert

SalaryOrEquity

Maker

@resh OK, took another look at this and made a tweak to make it clear that we're talking about post-money valuations (which is generally how I express valuations). That work better?

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8yr ago

Ole Lokote

@mattwallaert you're ignoring the time value of money (http://www.investopedia.com/term...). $1M vesting over 4 years is not equivalent to making an extra $250K / year. My equity may not be liquid for 5-10 years.

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8yr ago

matt wallaert

SalaryOrEquity

Maker

@ufalakachufa There are always going to be nuances about how to value equity - as with any product, you have to make tradeoffs that meet your audience whether they are. And there are far more people who don't understand how to value equity at all than those who should be taking into account time value.

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8yr ago

Daniel Foster

Pixsy

@ufalakachufa @mattwallaert Time value of money isn't a nuance. This is an important component of valuing equity. A $100,000 payoff in 10 years in worth only $46,000 today at an 8% interest rate, for example. In terms of making trade-offs based on audience, are you assuming that someone talented enough to be offered a position with equity is also unable to understand basic personal finance? I like the simple nature of your site, and perhaps you're falsely assuming your audience is too simple-minded.

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8yr ago

matt wallaert

SalaryOrEquity

Maker

@ufalakachufa @danielfoster437 I'm not assuming that a talented person doesn't understanding what you think of as basic personal finance...but I'm not assuming they do, either. Why? Two reasons: 1) I'm first generation to go to college in my family. When I joined a startup as Head of Product, I had never heard the word "equity" in the finance context and the CEO had to explain to me how shares actually worked. "Vesting" was something I wore under suits. Not everyone who joins a start comes from the cult of SF. 2) SOE is actually a feminist project and is a response to a very direct problem that comes from research. In situations where they are given an offer without equity (generally from a big company) and one with (generally from a startup), women are more likely to take the all-cash offer. This causes disparities in economic outcomes with direct downstream effects, because we end up with relatively fewer million/billionaire women. Every single variable that we add (like time weighting outcomes, in which you've built several assumptions of your own) creates inhibiting pressures that make it harder to communicate and push people toward cash offers. Is there room in the world for a more complicated comparison? Absolutely and I encourage anyone to go build that. But be absolutely clear: a tiny, tiny minority of people understand how equity works, and it is much, much smaller than the population of people who have real and valuable skills to contribute to the startup ecosystem.

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8yr ago

Daniel Foster

Pixsy

@ufalakachufa @mattwallaert You're definitely right that not everyone comes from a startup or personal finance background. It's an easy thing to overlook. This is a useful tool that will help a lot of people. Anything that helps resolve economic disparity is a good thing. With that in mind maybe you should add a note about the goal of the tool, ie to drive more women to take equity or link to a short page explaining why women unnecessarily reject equity? This would make sense since the stated purpose of your tool is to convince people to take equity over cash, not provide an equal overview of each option.

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8yr ago

matt wallaert

SalaryOrEquity

Maker

@ufalakachufa @danielfoster437 That's not quite an accurate statement. We aren't trying to convince people to take equity over cash, we're trying to correct for a systemic inequity that will cause people to take cash over equity in cases whether they wouldn't if they understood them differently. In a subtle, but I think important, difference.

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8yr ago

Sebastian Kim

Dixel

Nice work!

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8yr ago

SalaryOrEquity

A simple tool to help evaluate equity

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