[mattzito]

I obviously don't know the specifics of the dropbox option pool, but it's not uncommon to have employee options issued at a 409(a) valuation instead of the fundraising valuation.

So even if money was raised at a 10bn valuation based on the expectation of future value, a 409(a) valuation would probably place the company at somewhere closer to 10-40% of that, which puts employees in a much better situation.

[jalonso510]

You're right that options are granted at the 409a price (the common stock price) instead of the price investors pay in the financing, but as companies become more mature, the common and preferred prices usually begin to converge somewhat. In a seed financing you might see common stock valued at 10% of the preferred price, but in a late stage, billion dollar company there will be much less of a discount applied.

Employees granted options recently after the highest valuation financing would probably be completely underwater if the company is really worth $2b.

[mattzito]

Right, but if the 10bn funding was at a high multiple relative to revenue, the 409a will probably still be a lot lower. I'm not saying that it would be at 2bn, but the GP was talking about people being granted options at 10bn, and potentially they're being granted at a much lower value.

[ericfrenkiel]

Common hasn't been close to 10% in a loong while - common is likely presently valued at >75% of Preferred. Anything 1/9 to 1/11 is strictly seed-level discounts for common to preferred. Dropbox may even be at a point where it's no longer options but RSUs.

When common is equal to prefererd, you have a public stock price.