Dilution alone cuts a 0.25% startup grant to 0.153% by Series C

Take the dilution schedule on its own. Of Dollars And Data runs a 0.25% grant through a Series A at 20%, a Series B at 15% and a Series C at 10%, and the product is 0.153% ^[5][15]. On a $100 million sale that is $153,000, so three financings by themselves remove $97,000 of the $250,000 the new hire worked out in their head ^[2][16][17]. The piece lands on $97,500 ^[3]. The text we have breaks off mid-sentence in the section on taxes, before itemising the remaining $55,500 ^[18][14].

Timing does more damage than any single financing term. "Arguably the biggest issue that prevents employees from realizing their equity isn't related to financing mechanics, but timing," Of Dollars And Data wrote ^[11]. Equity vests over four years with a one-year cliff ^[4]. PitchBook put the median time to IPO for tech companies at 11.5 years ^[8]. Someone who vests in full and then leaves sits about seven and a half years short of that median. Then comes a 90-day window to decide whether to buy the options at a strike price fixed by the valuation on their hire date ^[19][10][12]. For later hires the site says that cheque often runs to five figures, due in cash, locked up for years and earning nothing ^[12].

Jared Heyman's analysis of Y Combinator companies found the ones exiting above $1 billion took about nine years and the ones below $100 million about three ^[9]. A liquidation preference takes the first dollars at that end of the range. In the article's own example, a fund paid $10 million for half a company at a $20 million valuation with a 1x preference, and it collects that $10 million from a $15 million sale, leaving $5 million for the founders and employees ^[7]. Holders of 50% of the equity get 33% of the price ^[20].

I'd treat the grant as a claim on an event somebody else schedules, bought with a salary the article describes only as "a bit below what the market pays for your role" ^[1]. Whether $97,500 is cheap or expensive depends on that discount being stated in dollars. The counter-case is in the same numbers: the same diluted 0.153% is worth about $1.53 million if the company exits at $1 billion, a size that took about nine years in Heyman's data ^[21][9]. Refresher grants can offset the pool refreshes that dilute early employees further, though the article notes they do not always arrive ^[6]. Some companies now give departing employees five to ten years to exercise rather than 90 days ^[13].