Equity Math for Startups
Paul Buchheit wrote a great article on how equity works in a startup:
The first thing to understand is that when shares are given to an employee or investor, they aren’t taken from someone else – they are newly created shares – the pie gets bigger. Of course, your slice of this newly enlarged pie is now a smaller percentage of the total. That’s dilution. A lot of people understand that. What they often don’t understand is deeper in the details.
He goes through several examples that made me even more suspicious of venture capital investment. A friend and I are starting a business together, so understanding how this works will (hopefully, assuming the business works out) be important.
Review: The Richest Man in Babylon
A few years ago, I picked up The Richest Man in Babylon by George S. Clason because I was interested in learning about money. It’s an amazing subject really, and I wanted to know more about it. The book more than fulfilled my hopes.
Written in 1926, the book is a collection of stories set in ancient Babylon, chosen because many of the financial principles still in use today originated there. The book opens with the story of Bansir and his friend Kobbi. Both have worked hard for many years and yet seem to have nothing to show for it. As they discuss how they would like to possess some of the riches they see around them, Kobbi asks what I consider to be a question so obvious I was surprised it had never occurred to me, “Might we not find out how others acquire gold and do as they do?”
