https://hunterwalk.com/2024/05/11/are-startup-stock-options-like-lottery-tickets-a-ceo-and-former-employee-discuss-and-my-pov/

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Are Startup Stock Options Like 'Lottery Tickets?' A CEO and Former
Employee Discuss. And My POV.

Posted on May 11, 2024 by hunterwalk

The good stuff on the Internet really does occur in the comments!

 1. I shared a post by Ben Werdmuller where he details that a company
    he used to work for had a recent repricing/restructuring of their
    stock to better reflect the current state of the company and
    provide incentives for the team going forward.
 2. Ben's general POV is that stock options are like lottery tickets
    and that in most cases it's a losing proposition for the average
    employee to exercise them - in fact, he's never bought his
    options at any company. He recommends just saving your salary
    instead.
 3. As you can guess I disagreed (stock options are an important part
    of startup incentives and over the course of a career, can be
    quite valuable for employees), but with three reminders/caveats
      + Don't behave as if they're worth anything until they actually
        are
      + Don't over-extend yourself to exercise them in scenarios
        which put your financial well-being at risk
      + Remember founders and investors will often find ways to
        protect themselves that employees/common stock cannot

[Screenshot-2024-05-11-at-7]AI generated image

I thought all that would happen is a few 'likes' and a comment or
two. But then a CEO jumped in to point something important out....
while it technically might have been the recent recap which
officially lowered the value of previous stock, it really was only an
effect, not a cause. [You can read between the lines in this whole
discussion to connect the dots on what company they're both talking
about - out of respect for neither of them specifically naming it,
I'll abstain as well].

Tony's (the CEO) response was an unlock for me in how I explain the
ups and downs of private stock to the average person.

For much of a startup's life new FUNDING VALUATIONS are LEADING
indications of POTENTIAL. They are what someone is willing to pay for
shares today based on what they believe the company CAN DO in the
FUTURE.

DOWN ROUNDS and RECAPS are LAGGING indications of PERFORMANCE. They
are what someone is willing to pay for shares today based upon what
the company HAS DONE in the PAST.

Obviously there's a little nuance here because in the former, each
successive round builds on what's been accomplished already, and in
the latter there's usually still some premium to current enterprise
value based on what a stock holder imagines they'd be able to get
down the road if the company improves performance.

There are a lot of down rounds and recaps in the market right now.
And a bunch of private companies still holding on to valuations that
they have not yet grown into. When those expectations are preventing
a company from moving forward productively they should be cleaned up.
I'm usually on the side of even doing it proactively (versus only as
a last resort) because it adds clarity in my mind. But it's an
emotional issue for many who hold on to the legacy mark and see any
decreases as money lost.

Updated: Ben responded to my response 

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