Hi! I'm Beth, a developer from the Long-Term Stock Exchange. We built TLDR Options to help job seekers feel less in the dark when considering an offer from a startup.
I've been a developer for over a decade, but when I was looking at my first-ever start up job I felt like an idiot. I had gotten equity before, sure, but always at a public company. Startup equity had at least six extra dimensions of uncertainty and I didn't even know which scenarios I should be considering! Even after educating myself and asking experienced folks I knew for the right questions to ask, I got as far as figuring out that it's a power law with a median value of zero and a mean value strictly greater than zero, and basically gave up there.
TLDR Options was born of the realization that I didn't need a perfect answer: I just needed access to intuition around possible outcomes. People who already know about things like exit sizes and dilution and valuation growth have that implicitly, but for newbies like me the most common answer we get is an only-half-joking '$0!' You can't get an accurate answer without understanding the ins and outs of valuation and exit scenarios and preferences, so instead of "accurate" TLDR Options just aspires to provide a more useful answer than '$0'.
Looking forward to hearing what y'all think!
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@bethcodes looking nice. Shared in the local startup community
Curious to hear your thoughts about startup compensation, @ericries and @bethcodes.
It's very opaque at many companies and today's options structure introduces a large risk for many employees (e.g. you pay thousands of $ within a short exercise window for equity earned in a company that might be worth nothing several years in the future). Much of this stems from the way startups are legally structured in the beginning.
@rrhoover@bethcodes I am writing a bit about this in my new book, so it's definitely top of mind. I think the concept of startup equity, where employees are compensated not out of today's cashflows but via a financial derivative that is tied to far-future impact, is a really good model. It directly incentivizes learning about the future and long-term thinking far better than most other common compensation instruments, like salary and bonuses.
But these benefits only kick in if employees actually understand what they have. If most employees don't value their equity (just assume it's worth $0), then it has none of the incentive benefits above. And if they over-value their equity (just assume they will be rich if the company does well), this can lead to a lot of cynicism and mis-allocation of talent.
And then there are a lot of common practices today (like the excessively short exercise window) that are just bad. We built our own stock option grant legal documents for LTSE, which have a couple new features that I think improve on the standard grant setup. We hope to publish these some day, once we're confident they really work as designed.
@ericries Hi Eric - This is a great tool, love especially the %probability estimates for +ve outcomes by stage). I completely agree with your comments re the power of stock options for startups looking to attract, motivate, and retain top talent. At Index Ventures, I just launched a tool, OptionPlan, that does a similar job to TLDR Options (which I only came across two weeks back), but from the perspective of entrepreneurs trying to decide how much equity to give to each member of their team, individually and in aggregate for their ESOP sizing. It uses the most comprehensive data set of grant data ever made public (we partnered with Option Impact). Also models out potential upside for team members. We've had a great reception from the ecosystem so far!
You can find it at www.indexventures.com/optionplan - and also of course on Product Hunt!
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A neat little tool.
One note, the "Founders: Not Average?" button and the social media buttons are floating above the amount of money your stock could be worth. I'm on a 15in MBP and could not make my browser tall enough to get them out of the way and I wasn't able to read the pricing number. Might look into that. (This was using Safari)
@mccataldo you want to ask for "the total shares outstanding on a fully-diluted basis"
If your direct manager won't give you this information (or doesn't know it), I would be very concerned
I really appreciate the transparency that a simple tool like this provides. So few folks who join startups understand what stock options can bring, and what their drawbacks are, but at least this gives a sense of range and impact. Thank you for creating it Beth & LTSE!
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Nice visualization! Dilution often makes a huge difference though. A typical 0.01% of Series A equity gets slashed every time the startup takes funding to survive a bit longer/grow faster. I think it is worth considering how to build dilution in to offer a more honest picture of companies that get bought for more than, say, 8 figures. Thanks for posting!
@w1zz1e Yep! These results reflect an assumed 35% dilution per round, and it's one of the things we found people had most often missed when running their own scenarios.
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@bethcodes Right on. And silly me. I found the "How we guesstimate" button. I like the approach. I would guess that there is some correlation between number of rounds actually raised and degree of final dilution based on where the golden money ball lands.
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