It doesn’t matter. This is a silly debate. Whether the last round has a few advantageous / risk-mitigating terms or not 9 times of out 10 won’t matter:
- If the company is wildly successful and hasn’t raised $250m-$500m+, and either IPO’s at a high (>$1.5B+) valuation or is acquired for $1b+ … these terms don’t matter. They either go away, don’t come into play, or have a trivial impact.
- If the company isn’t successful, you won’t make any money as an employee.
OK so let’s figure out the other cases.
Rough-and-tough, figure on this rule: a company has to be sold, or IPO, for a valuation >= 10x the amount of capital invested for everyone to make any real money. If this happens, everyone wins, and the “lay” employees (who often own a very small % of the company) should be in the money.
So do the best you can with this analysis: Do I believe the company I am working at can be worth >=10x the amount Crunchbase says they’ve raised?
If so, don’t sweat this. Just do what you can to help them get to 10x the $$$ raised.
But if you don’t see it — worry. If they’ve raised $200m, but things don’t seem to be going well — there’s a good chance your equity will be worthless as an employee.