gistfile1.md

On the relative value of startup stock

How do you compare the potential value of different stage companies? And as a company progresses what is the appropriate amount of stock to give new employees?

Using data from Crunchbase and Yahoo Finance we can calculate the average value created per company broken down by how much money they have raised. From this we can then compute relative returns at the different stages, e.g. $1M raised, $10M, $100M, etc.

tl;dr

For this exercise we'll calibrate relative to expected return from a company that's raised $1M.

Checkout roi.sql for the source to this table.

   money raised | fraction necessary to match value at $1m

-------------------:|---------------------: 1,000 | 1.9017 10,000 | 1.8790 100,000 | 1.6041 1,000,000 | 1.0000 10,000,000 | 0.3162 100,000,000 | 0.0320 1,000,000,000 | 0.0017

So, if as an employee you had an offer from Company A that had raised $1M of 0.1% and you were looking to get Company B that had raised $10M to match it you’d want at least 0.03%.

roi.sql

-- Source: Crunchbase.com & Yahoo Finance
with money_buckets as (
  select
    distinct pow(10, floor(log(money_raised)/log(10))) as bucket
  from
    companies
  where
    founded > '2003-01-01'::date and money_raised > 0),
bucket_values as (
  select
    money_buckets.bucket as money_raised_gt_eq,
    (sum(ycv.market_cap) + coalesce(sum(acquisition_valuation), 0))/ count(*)::float as net_value
  from
    money_buckets
  inner join
    companies on money_raised >= money_buckets.bucket
  left join
    yahoo_current_values ycv on regexp_replace(companies.stock_symbol, E'[\\w\\s]+:\\s?', '') = ycv.stock_symbol
  where founded > '2003-01-01'::date
  group by 1
  order by 1)

select
  money_raised_gt_eq,
  (select net_value from bucket_values where money_raised_gt_eq = 1e6) / net_value as value_relative_to_1m
from
  bucket_values;