> Hmmm...I think the part that is maybe missing from your model is that the value is not hypothetical and made up, you need to price the certainty into the value itself when negotiating the offer. If you are given very little information, the value is low. But it's not "high value low certainty" it's simply low value.
The context for this argument is that joining a profitable business carries less risk of being deceived / manipulated and waking up after 4+ years to a reality that is totally different than what you were repeatedly lectured to expect.
Your response doesn't really refute or address that argument. You are claiming that in the theoretical case that you are given 100% valid information and 0% hype, you should be able to to get a more accurate profit expectation. That's, of course, true.
The reality still is that you will not get 100% facts and 0% hype in the vast majority of startups. The entire industry has been operating for some time on bringing in clueless fresh grads, telling them they're all "rockstars", and that if they'll just work 14hr/day for 4 years, they'll also be multi-millionaires.
So while in theory (as you correctly point out) there can still be room for verification and realistic assessment of upside in startups, in practice the startup model has more loopholes, and these are universally exploited, such that the industry is generally quite deceptive.
It's just like how in theory, given perfect information, a used car can be priced almost as accurately as a new one. In practice, since there's so much room for deception and manipulation, that's not the case, and the industry has a well-deserved reputation of being shady and untrustworthy.
Now, imagine profitable businesses offered you a deal like this: "You start working at half your usual market salary. After 4 years, if you're still with us and we really like you, we'll pay you a huge one time bonus. We won't tell you exactly how much it will be, because frankly we don't know (and there's a tiny chance we won't be able to pay it anyway), but it will almost certainly be over $10 million and you'll get sooo rich, bro!".
Most people would laugh at that, because the normal full-time employment isn't so exploitable. But the startup model is, and that's the deal most startup employees agree to.
> Skype equity that allows you to be fired and have it bought back at strike price is not "high value low certainty" it's simply low value. Engineers overvalued their equity going into it. They were not misled, and this was something that could've been reasoned about going in easily. They should've read what they were signing.
As before, you are correct in theory, but in practice this is extremely shady. There's a pretty standard set of terms for equity in startups, and clawbacks are definitely not part of it. In fact, they go pretty much directly against it, and against the meaning of what option plans aim to be and achieve.
It's not unreasonable for an inexperienced engineer to assume the standard terms will be followed in his case as well. A fresh grad won't spend a substantial portion of his signing bonus on a lawyer to read his contract, and the clause was obscure and vaguely phrased that even a lawyer might miss it.
What Skype (technically, SLP) did was obviously legal, but extremely shady, and a good example of a savvy business tricking naive engineers. This wasn't innocent: these options that could (and eventually did) amount to millions of dollars were dangled in front of the employees noses since they were mere candidates. And all this time, they were actually worthless.
Legal? Probably. Shady and deceptive? Definitely.
> Some employers will give you enough information to make an informed decision (cap table, current revenue, projections, etc.). Most will not. Most are not worth working for, or at least their options are not worth valuing above $0. Some are, though.
Now I'm curious: which are these employers, in your opinion?