1/ When I presented an offer to a candidate at Wunder (which always included equity options), I’d walk them through the ways you can get less than you would by a % of ownership calculation as a common shareholder

This is what I’d say...

2/ The biggest and first is the “preference stack”. This refers to how much of a potential exit investors can take back before any distribution to common shareholders. It’s the result of a (I actually think quite fair) term in venture capital rounds...

3/ Which says in the case of an exit, the investor gets to choose between taking her $ back plus some nominal interest rate, or participating as a shareholder. If you do the math on that you’ll see that happens when you sell below the valuation they invested at.

4/ In my opinion if you raise $10m from me at a $100m valuation with a plan to get to $1b, and sell for $50m, it’s fair for me to ask for my $10m back. And whether my opinion or not, this is 100% the market standard in VC and we have and will continue to accept this term.

5/ This isn’t such a big problem at the relatively low - in the grand scheme - amounts and valuations we’ve raised, which has been deliberate partially for this reason, however if I come to you in 2 years with a $100m round at a $500m valuation, ...

6/ You should have some difficult questions for me about why I’m so confident we’re going to exceed $500m at exit that I’m willing to risk the team’s (ie common’s) collective pie.

(That Wunder founders hold common stock helped here)

7/ Two, if you leave the company, you have to exercise your options over some annoyingly short period - we’re working on it - in order to then actually own the shares, and the purchase of the shares at a massive discount (we sure hope) to fair value creates a big tax event...

8/ ...without a corresponding cash creation event. So basically you have to pay taxes on your share gains before you have $. Paradoxically the more value we create together the more acute the problem. There’s not a ton we can do here beyond stretch the days as much as possible.

9/ Finally, and this may be obvious as you are currently being offered shares that did not exist a year ago, if we are successful we are likely to create additional shares to sell for capital, and we are certain to happily part with many shares to attract new great people.

11/ As a shareholder the question is can we increase the value of the company by more than the dilution we experience. With financing rounds, we’ve been diluted 20-30% every 18-24 months and at least doubled every year, so it’s been a very good trade for shareholders so far.

12/ And we will continue to add team members we’re confident can add more value than the dilution we’re taking to add them.

But ultimately, you are trusting us to not dilute you unnecessarily or unwisely and I encourage you to ask any questions you’d like to on this.