| Yeah, there are a lot of unstated premises here. Volatility is important to option valuation but the mechanics of real option valuation (what we are talking about) are materially different from black/scholes. In fact, black scholes is more descriptive of option trading than predictive of option valuation. Since there needs to be an active market for this to be relevant, I wouldn't use it for thinking about startups. That said, these highfalutin financial concepts are definitely applicable to startups, but really the question is "what do you think the terminal value of your startup is?" If you think you have a shot at owning a big chunk of a billion dollar company, the value of that shot is: (Probability of success) * (Terminal value) If the undertaking has a 1% chance of being worth 1,000,000,000 and 99% chance of being worth nothing, then the whole opportunity is worth about ten million dollars. So, yeah. Volatility doesn't matter all that much. Also if you are doing a Startup because of a black scholes model you are probably insane. |