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Comment by javajosh | Hacker News Reader

I always feel dumb asking - but doesn't the total number of shares matter? The real thing you're buying is a fraction of the pie when someone buys your company, and it would seem to matter quite a lot whether the pie was cut into 10^3 or 10^6 pieces. Indeed, I wish we could just talk about ownership percentage instead of shares to remove the ambiguity.

Why is there a reluctance for people to talk about this openly?

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There's nothing at all dumb about this question! And the answer is most definitely "yes."

As a shareholder you should have an understanding of how many shares are authorized (i.e., how many units of measure the company has been divided in to) and how many of those shares are issued (i.e., how many units of measure have been given out and are no longer up for grabs).

The reason it's done this way and not via simple percentage (which I agree is WAY easier to understand) is a matter of practicality; as new shareholders come on board it would be prohibitively difficult to go back to all existing shareholders and modify their percentage.

The number of shares should be figured into the estimated price. If they figure the company is valued at $100, and a share at $0.50, then they should be issuing 200 shares.

You should be completely mistrustful of anyone who offers you shares and doesn't tell you the # of shares outstanding. Alternately, if they tell you the value of a share, they should tell you the estimated value of the company.

The alternative is presented in Mel Brooks' The Producers.

> You should be completely mistrustful of anyone who offers you shares and doesn't tell you the # of shares outstanding.

this is an amazingly important point that many people I've seen new to the startup world ignore to their peril. it is too easy to get big eyes when you hear you are getting 50,000 options not realizing that it is only 0.000001% of the company since you don't know # of shares outstanding, across all classes of shares.

It's maddening, too, because nobody ever just tells you the actual shares. EVERYONE says, "You'll get 50,000 options!" My answer is always, "Okay, and what percentage of the company is that?" and the answer is always, "Um... I'd have to go look it up."

Just once, I'd like someone to provide that information for me proactively. It would instantly increase my estimate of their integrity by 150%.

I don't understand how one could not know what percentage of the company that is. It seems wholly irresponsible not to; both from the perspective of the potential employee (who may get too little) and from the perspective of the employer (who may give away too much).

Well that and do they mean 50k options as traded on the open market or options enough to purchase 50k shares?

I had an employer promise one and then try to weasel into giving me the other. I threw a fit and made them fix it. Theynwere bankrupt a year later. :whomp whomp: But my point is when they say "option", ask them to define it One is worth 100 times more shares.

> You should be completely mistrustful of anyone who offers you shares and doesn't tell you the # of shares outstanding

AKA every VC funded startup ever

I've had this happen to me, and quitting was one of the best decisions I ever made. If you can't be upfront about equity, it's a symptom of a much larger problem.

I'm in that position now, and the more I think about it the more it bugs me. I think you're absolutely right.

depends what the valuation is based on. If the company is generating revenue in theory and to some degree of tax lawfulness the strike price should be related to the actual ultimate market value

even if it's not and depending on the type of grant the strike price matters quite a bit for tax purposes to the grantee.

This is a good example of a spectacularly bad comment: it is both filled with jargon and it totally misses the point. "Strike price", "grant" etc. is unnecessary.

At the point of a sale, your shares worth (v) is a function entirely of the price paid for the company (p), the number of shares you have (n), and the total number of shares (N), like this: v = n/N * p. You can't even begin to speculate on the value of n for a given p without knowing N.

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