A better offer letter
The part about exit values is a bit misleading. You don&#x27;t include anything about liquidity preference or anything else that would be taken off the top before common shares are bought out.<p>And if shares are diluted or liquidity preference is added later after some fundraising, do you always go back and share all of the specifics of all of that with all employees? Kudos if you do, but if not it kinda renders the initial transparency less impressive or useful.<p>I&#x27;ve generally found the advice here [0] to be a much better proxy for hypothetical exit calculations.<p>One other thought: isn&#x27;t it odd that you&#x27;re willing to provide a distribution over salaries to argue for the salary you offered, but you just pull a number out of thin air for the possible exit?<p>Why not provide a distribution on exit values (and evidence for why you believe it), and then show the <i>expected value</i> along with risk, under that distribution.<p>At the very least, this way if your distribution over exit values isn&#x27;t a severe power law drop off with uncomfortably low expected value, the candidate knows you&#x27;re blowing smoke and can walk away.<p>Instead, you <i>deny the premise</i> that an expected value calculation is useful towards the end. Wow, that is absolutely walk-away-immediately stuff right there. &quot;The distribution over outcomes is unknown...&quot; Right, so of course you should make zero attempt to gather data about it and model it. That&#x27;s one of the most bananas things I&#x27;ve ever seen, and it&#x27;s right in the offer letter!<p>Picking a number like 77MM is almost like a dirty in-app purchase priming trick or something. (And no, it&#x27;s not the least bit redeeming to add a tiny line at the bottom of the chart stating that it&#x27;s just an example and not a forecast.)<p>If you personally, actually believe no one should engage in an expected value calculation regarding their start-up compensation package, then why not simply omit any slides about what the options will be worth? The 77MM thing is a red herring, and surely you would agree that in the absence of enough evidence to put together a crude approximate distribution, it can hardly been viewed as a better alternative to <i>just make shit up out of thin air</i> ...<p>Pointing out the 77MM example is basically saying &quot;Hey, look at this number! It might not be related to your shares or your life at all, but look at it anyway!&quot; On the other hand, if you believe that 77MM is &quot;reasonable&quot; in some sense, well then you are absolutely talking about some approximate notion of a prior distribution on your exit value.<p>[0] <a href="http:&#x2F;&#x2F;www.danshapiro.com&#x2F;blog&#x2F;2010&#x2F;11&#x2F;how-much-are-startup-options-worth&#x2F;" rel="nofollow">http:&#x2F;&#x2F;www.danshapiro.com&#x2F;blog&#x2F;2010&#x2F;11&#x2F;how-much-are-startup-...</a>