Show HN: Startup Equity Adventure Game
4 hours ago
- #startup-funding
- #stock-options
- #equity-dilution
- The game simulates a startup journey from idea to IPO, covering equity, funding rounds, dilution, employee stock options, and exit payouts.
- Founders should file an 83(b) election within 30 days of receiving shares to pay minimal tax upfront and treat future gains as capital gains.
- Startups often authorize 10 million shares initially, with founders issuing themselves shares at a low par value (e.g., $0.0001/share).
- Early-stage funding commonly uses SAFEs (Simple Agreement for Future Equity), typically with post-money valuation caps to fix investor ownership.
- Setting a SAFE valuation cap too high risks down rounds, investor misalignment, and hiring difficulties due to inflated option strike prices.
- Investors require an option pool (usually 10-20% of shares) before priced rounds, diluting founders to attract talent with equity.
- Series A is the first major institutional round, where SAFEs convert to shares and all existing shareholders get diluted; option pools are often refreshed.
- Down rounds occur if a new valuation is lower than the previous round's, signaling poor growth and causing extra dilution and investor issues.
- Series B and C funding rounds involve scaling the business, with continued dilution and smaller option pool refreshes, but later stages are rare for startups.
- Employee stock options vest over time (e.g., 4 years with a 1-year cliff), and exercising them has tax implications depending on ISO vs. NSO status.
- Exits can be via IPO or acquisition, with IPOs often having lockup periods and acquisitions involving cash or stock payouts to shareholders.
- A down-round IPO can trigger liquidation preferences, making employee options worthless and severely diluting founders and early employees.