The value of employee equity depends a lot on volatility
4 days ago
- #employee compensation
- #startup equity
- #volatility
- Employee equity value is heavily influenced by volatility and embedded call options.
- Standard vesting provides an option to leave if startup fails, enhancing equity value.
- Expected equity compensation can far exceed naive calculations due to volatility.
- High volatility can significantly increase annual expected equity compensation value.
- Risk aversion, cash compensation, and employment terms are additional considerations.
- From a returns perspective, volatility in startup equity matters greatly.