How Incentive Stock Options works (in one graph)

November 21st, 2014

Disclaimer: I am not a financial advisor or an accountant.  Please go ahead and use this graph as the only source of information If you really want to shoot yourself in the leg,

And here is the graph which has almost everything what you need to know about ISO’s to get rich and famous.Click on the graph to zoom.

I really appreciate Hans Reichenbach’s help proofreading the text on the graph.

ISO

 

 

 

 

Once upon a time

November 2nd, 2014

Once upon a time, software engineers were a rare breed. There are dozen of millions of sw engineers now.

Once upon a time, you had to compete only with local software engineers. You are competing with people in Kuala Lumpur and Tunis now.

Once upon a time, you had to learn two programming language on one operation system and you was set for life.  New languages, frameworks and tools pop up each year now.

Once upon a time, the information was a secret passed from masters to apprentices. A 12 year kid has access to the same info which has veteran engineer with 20 years of experience now.

You can be smart, but there will be millions smarter than you. You can be experienced, but there will be millions who are more experienced than you. You can work hard, but there will be millions who will worked harder than you.

So, what are you going to do?

 

Startup related books and videos

November 1st, 2014

I just finished 7 day startup by Dan Norris. I like this book. It gives you a step by step plan how to launch in 7 days. I would really recommend reading it (especially for somebody who struggled to launch and stuck in “wantrepreneur” land).

Another book which I would recommend to read is Traction by Justin Mares. I wish I had this book 12 years ago when I have started my first startup. It gives a great overview of all kind of channels to get sales and sets up great framework how to explore these channels and  ultimately get some traction.

And as a final note. There is video of Stanford entrepreneurial classes.  It has a dozen of 45 minutes lectures from people who successfully built startups. I would say that content is quite uneven. Some of speakers were amazing (giving interesting info, explaining both pitfalls and shortcuts) and some wasn’t that interesting. Overall, it’s must watch series.

Number of shares doesn’t matter

October 23rd, 2014

I am amazed how many people ask “how many shares (stock options) will they get?”.

This question

  • is useless
  •  shows the lack of knowledge

It doesn’t matter how many shares you have. What matter is a percentage of a company you will own (number of shares / (total number of shares aka. “outstanding shares on a fully diluted basis”)). This is much better indicator.

However, even percentage of ownership could be misleading, because I would rather have 0.001% of Google vs 100% of some Acme Inc. filing for a bankruptcy.  So, you want to know

  • Your percentage of ownership
  • Company valuation

BTW. There are some people who are really worried about a dilution. They falls into the same trap. They just take one number into account (percentage of ownership) and disregard second one (company valuation). In the of dilution, the first number goes down and second number (in a good/normal case) goes up. As long as multiplication of these two numbers goes up you are in good shape.

Summary (formula of your future fortune)

The value of your piece of pie = (Your shares / All shares) * Company valuation