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by nostrademons 1677 days ago
Something's screwy about that 409A, it puts the valuation of the company at $3.85M on $10M in invested capital, i.e. the company is worth about 1/3 what investors have put into it. Would be consistent with a down round and failing company, though.

I'd run. If the numbers there are correct, neither management nor investors really have any confidence in the company. As an employee you shouldn't either, particularly for that far under market in cash comp, and if somebody is willing to double your cash compensation, take it.
1 comments
rkk3 1677 days ago
> Something's screwy about that 409A, it puts the valuation of the company at $3.85M on $10M in invested capital

That is not the valuation of the company, not all shares outstanding are common, some are preferred which are going to have a substantially higher FMV for an early stage.

I don't know what a "normal" multiple/mark-up preferred would normally have at this stage, obviously it varies on terms. 55M shares outstanding this early would not be the sign of a "healthy" cap table unless they didn't start with the standard 10M outstanding.

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throwaway_9989 1677 days ago
The preferred price is about $0.9 (I heard it's been like this for the last 2 rounds). Does that mean the current valuation of the company is $49M?

The parent comment is also correct. We've experienced a down round due to the pandemic.

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comp_throw7 1677 days ago
If the company's gone through a down round, it's very likely they took funding on unfavorable terms (i.e. worse than 1x liquidation preference), which makes it that much less likely your (non-preferred) equity would ever be worth anything. Take the cash offer (though, if you're in the US and have 4 years of experience, $120k is a bit of a joke too; you should be able to do substantially better even limiting yourself to full-remote companies).
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rkk3 1677 days ago
> If the company's gone through a down round, it's very likely they took funding on unfavorable terms (i.e. worse than 1x liquidation preference), which makes it that much less likely your (non-preferred) equity would ever be worth anything

which is expressed in the preferred share's being valued at 13x the common shares

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rkk3 1677 days ago
> Does that mean the current valuation of the company is $49M?

No.

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