Savvy investors include non-dilutive clauses when they know money needs to be raised, but good luck trying to negotiate this as an employee. It’s also not too bad if the dilution occurs at increasingly higher share valuations and help compound growth (see TSLA).
Re:I sold Baremetrics
by coward8675309 on Tuesday November 10, 2020 @12:18PM
(#25048372)
Yes, though the expression “an up round is an up round” has a lot of truth to it. Dilution is important if you care about control, but as long as the stock is worth more on a per-share basis, you’re doing better.
The problem is when people anchor their calculations about their future lottery winnings to the current float.
I try to tamp down expectations when I’m hiring by trying to sketch out a wide range of plausible scenarios (basically the Drake Equation for startups) but I’m going to go out on a limb and guess that a lot of hiring managers and HR departments set new hires up for disappointment by not throwing cold water on their very optimistic math.
Correct me if I'm wrong here, but isn't another major issue faced by early employees that the math might look good when they join the company, but further rounds dilute their stake so much that it becomes meaningless?