Thread by @asanwal

1/ See so many startup friends overestimate value of options they get

So

Here’s a random idea to help prospective startup employees understand the odds their options will be worth anything

Tell me what you think, ie would you do it?

2/
First, you’d upload your startup offer letter with details on options (qty, strike, etc) plus some supplementary info

We’d use @cbinsights data to assess the company, industry, comps and assess odds on your options being worth anything

It’d be free

Thoughts?

3/ was just looking at friend’s offer letter from a “pre-IPO” BI company along with some details he learned while interviewing

Near zero chance of his options being worth anything.

This shit happens a lot

4/ btw, the whole “pre-IPO” branding is BS unless a company has filed its S-1

Don’t fall for marketing BS like that

5/ also, some companies are better at fundraising than actually building a biz

Being over-capitalized can often be bad for your stock options

6/ BTW, a good way to evaluate this is to look at revenue to funding raised ratio. Here's a look at 2 BI players

@Domotalk's rev/raise ratio is 0.16x. By contrast @tableau at time of IPO had rev/raise ratio of 8.51x

Which would you want stock options in? The answer is obvious

7/ to make this super clear, a high ratio indicates a company can turn funding into revenue (good thing)

A low ratio can be indicative of a startup whose “biz model” is raising VC

8/ “This is particularly peverse because the higher the valuation, the less money the employee will make on their equity.” - @fredwilson

avc.com/2018/06/the-va…

9/ About that Domo valuation (see #6 above), looks like it's being cut by ~75% businessinsider.com/domo-ipo-valua…

This back of the envelope analysis above was just math

But most prospective startup employees don't have access to this type of analysis/info

And so common gets slaughtered

10/ mentioned this idea in @cbinsights newsletter

Several folks leaving startups reached out wanting to get data-driven insight that might help them determine if they should exercise their options

I’m talking to several of them in next couple of weeks

This idea has legs

11/ Based on initial convos, some observations:

1. Employees know their former company well. They don't understand industry, comps, multiples
2. They are optimistic (perhaps overly so) of co they've left
3. They really want to be more informed before deciding to exercise options