Sorry Startup Employee #100, Your Equity Probably Won’t Make You Rich

Bloomberg’s article about lower-than-expected financial gains from startup IPOs for midlevel employees stuck in craw this week because there’s a handful of complex issues at play here.

In No Particular Order:

Startup Equity Is Unlikely to Make You Fabulously Wealthy After Four Years Unless One or More of the Following Apply —

• You were a founder.
• Your company ends up being worth more than $10 billion.
• Your company raises very little capital and sells for $500 million+.
• You join at an executive level pre-IPO for a company that already has huge potential.

Even in successful companies, most initial equity grants will be worth a few hundred thousand dollars to perhaps $1–2 million, when fully vested. Rising in an organization and getting more grants pre-IPO helps, but generally it’s just math.

Assume you get .25 percent of a company and you’re diluted 50–75 percent before IPO. For an “average IPO” it’s just not millions and millions of dollars. It’s real money. Real good money. But don’t assume one IPO turns you into a multi-millionaire.