> What will happen in the best case:
- I had 1% of a 10M dollar company. They did well and now he has 1% of a 100M company (dilution in your face!).
You've meant to say "They did well and now he has 0.1% of a 100M company" I assume? Otherwise numbers don't add up. If all goes well the value of a smaller percentage after dilution should be higher than before the dilution, for example: 1% of 10M ($100k) -> 0.2% of 100M ($200k).
He didn't lose 9M. In his vision they did well and increased the worth of the company without outside investment. In reality, they didn't do well at all, because 10x dilution when the company grows 10x means the company has not actually created any value, it's just been given cash.
What a typical employee thought:
- I have 1% of a 10M dollar company. We'll do well and in 2 years I will have 1% of a 100M dollar company.
What will happen in the best case:
- I had 1% of a 10M dollar company. They did well and now he has 1% of a 100M company (dilution in your face!).
He just lost 9M. They were actually never on the table, even thought the hiring department didn't hesitate to pretend they were.