The 2015 Wealth Report(content.knightfrank.com)
content.knightfrank.com
The 2015 Wealth Report
http://content.knightfrank.com/research/83/documents/en/wealth-report-2015-2716.pdf
6 comments
Moscovitz did not say that employee #100 made $200M at FB. Read the article. First, this was an overly simplistic analysis. It assumes a strike price of $0.00... Which never happens, and certainly wouldn't have happened by the time FB hit 100 employees. It assumes full vesting. It assumes no lockup on liquidity. It assumes no dilution from exiting... which, in the real world, never happens.
You can actually see how much money FB's top shareholders were worth at their IPO. Very, very few employees made over $10M. TEN. Before tax.
A lot of people front in SF / the Bay Area. Very, very few are worth over $30M in liquid net worth.
You can actually see how much money FB's top shareholders were worth at their IPO. Very, very few employees made over $10M. TEN. Before tax.
A lot of people front in SF / the Bay Area. Very, very few are worth over $30M in liquid net worth.
What do you think the strike price was at 100 employees? I mean seriously. I know a guy who was around number 70 at Google and his strike price was about 30 cents.
Correction: The S-1 listed only a handful of the top people.
Correction: The S-1 listed only a handful of the top people.
It is worth noting that the S-1 listed one shareholder (among 10 or so individuals) who owned 10 bp of stock. Facebook thought that was worthy of disclosure. Like the commentator above, I'm highly skeptical that employee #100 got 10 bp stock (unless it was matching some google offer etc not something Dustin implied).
I think the 'TEN' was emphasising $10m rather than stating only 10 employees made that much.
It actually seems low to me too. $30 million is a lot of money, but given the number of companies with $1bn+ valuations recently, you'd think there would be at least 200 from those alone.
It may be they are not counting paper wealth in private companies. It may also be that many of these $1bn+ valuations came in the last year or so (their data is from 2013.)
It may be they are not counting paper wealth in private companies. It may also be that many of these $1bn+ valuations came in the last year or so (their data is from 2013.)
If the company is worth $1BB, then you must own 3% of its equity in order to have $30MM worth of equity of that company [1].
Non-founders rarely, if ever, are given that much equity (commonly cited numbers tend to top out around 2%). The most likely candidates are engineer #1 and an early VP, but engineer #1 has likely been diluted by over 30% since seed stage and even the exec will have been diluted by 10~20%.
At $5BB, a nonfounder needs about 0.6% of the company. By this point though, dilution is usually even more severe, and engineer #1 will likely have had his/her initial share cut by close to 50%. This means that only the earliest of early employees, along with the VP level hires, will have $30MM at a typical $5BB startup (though $5BB startups are hardly typical).
It's the companies that are another order of magnitude higher in valuation that mint wealth of that kind to dozens of employees.
[1] ignoring liquidity preference for the sake of simplicity.
Non-founders rarely, if ever, are given that much equity (commonly cited numbers tend to top out around 2%). The most likely candidates are engineer #1 and an early VP, but engineer #1 has likely been diluted by over 30% since seed stage and even the exec will have been diluted by 10~20%.
At $5BB, a nonfounder needs about 0.6% of the company. By this point though, dilution is usually even more severe, and engineer #1 will likely have had his/her initial share cut by close to 50%. This means that only the earliest of early employees, along with the VP level hires, will have $30MM at a typical $5BB startup (though $5BB startups are hardly typical).
It's the companies that are another order of magnitude higher in valuation that mint wealth of that kind to dozens of employees.
[1] ignoring liquidity preference for the sake of simplicity.
From Forbes, yesterday:
"Today, there are more than 80 unicorns, or companies with a valuation of at least $1.0 billion—that’s more than double the number last year, and, according to CB Insights, just three fewer than the last three years combined. As for unicorn exits: 2014 saw almost twice as many billion-dollar exits (32) as 2013 (17)." (http://www.forbes.com/sites/truebridge/2015/03/09/too-many-u...)
It's hard to tell if the "80 unicorns" includes the 49 exits from 2013 and 2014, although the wording (to me) suggests they do not. Regardless, many of these companies have co-founders and an early CTO hire often gets ~5-7% in options (which are then diluted, granted.) Also, if the minimum to be included is $1bn, then the average is somewhat higher (although not too much higher, given the shape of the distribution.)
So, between the 2-5 people who might own more than 2-5% of the company, the 80-129 unicorns over the past few years, and the average unicorn valuation of $1.5bn to $3bn, all somewhat informed guesses, my swag was about 200 people with paper net worth of >$30mm. I mean, you could easily see a company like Slack, which grew very quickly, having 4 or 5.
Of course, per the referenced paper, these people probably aren't flying much on private jets since, to my knowledge, NetJets doesn't accept unexercised stock options as boarding passes.
"Today, there are more than 80 unicorns, or companies with a valuation of at least $1.0 billion—that’s more than double the number last year, and, according to CB Insights, just three fewer than the last three years combined. As for unicorn exits: 2014 saw almost twice as many billion-dollar exits (32) as 2013 (17)." (http://www.forbes.com/sites/truebridge/2015/03/09/too-many-u...)
It's hard to tell if the "80 unicorns" includes the 49 exits from 2013 and 2014, although the wording (to me) suggests they do not. Regardless, many of these companies have co-founders and an early CTO hire often gets ~5-7% in options (which are then diluted, granted.) Also, if the minimum to be included is $1bn, then the average is somewhat higher (although not too much higher, given the shape of the distribution.)
So, between the 2-5 people who might own more than 2-5% of the company, the 80-129 unicorns over the past few years, and the average unicorn valuation of $1.5bn to $3bn, all somewhat informed guesses, my swag was about 200 people with paper net worth of >$30mm. I mean, you could easily see a company like Slack, which grew very quickly, having 4 or 5.
Of course, per the referenced paper, these people probably aren't flying much on private jets since, to my knowledge, NetJets doesn't accept unexercised stock options as boarding passes.
MM is often used to denote millions, but I don't think BB is used to denote Billions. Do you have a cite that indicates otherwise, because I don't see it on a quick search.
M = 1000
MM = 1000 * 1000
NMM = 1000 * 1000 * 1000
pp = pages
ll = lines
so it's a natural logical extrapolation to go for
bb = billions
http://www.riskglossary.com/link/mm.htm
MM = 1000 * 1000
NMM = 1000 * 1000 * 1000
pp = pages
ll = lines
so it's a natural logical extrapolation to go for
bb = billions
http://www.riskglossary.com/link/mm.htm
If the analogy is billions to millions,
BB = Billion * Billion
I would suggest googling "$1BB". They're both rather commonly used.
That being said, MM is more necessary because "M" also denotes 1000, and can thus be ambiguous.
That being said, MM is more necessary because "M" also denotes 1000, and can thus be ambiguous.
Interesting. Just to clarify why I asked, I googled "MM millions" and saw the answer right away but a search for "BB billions" came up rather empty (I read the first result and skimmed the title and snippet for the first page). "1BB" came up with bed and breakfast results. "$1BB" did have some results, though some were like me that this was the first time seeing it and they were asking about it. The other sites are blogs and nothing like Bloomberg.
Anyway, thanks, next time I see it, I guess I will not be confused.
Anyway, thanks, next time I see it, I guess I will not be confused.
Etymylogically, "million" derives via French from Italian "milione", the augmentative of "mille", thus a thousand thousand (MM). In British English "billion" originally meant "a million million" a la French "milliard", but has shifted to America "thousand million".
Even if you hadn't seen it before, it's clear enough in context.
There is an enormous difference between paper money and real, liquid money. There is an enormous difference between the headline price an investor invests at, with all their Preferred rights, and what an employee can actually cash out at.
There are very, very few cash exits of $1B+ in any given year. And far less than the majority of those have rights that allow employees, or even founders, to cash out at, for example, the sky high initial IPO market cap pop price.
There are very, very few cash exits of $1B+ in any given year. And far less than the majority of those have rights that allow employees, or even founders, to cash out at, for example, the sky high initial IPO market cap pop price.
Well, sure, but the referenced paper mentioned "net worth", not cash. I assumed they were ignoring people whose net worth included hard to value private company stock.
Yes, but that's kind of my point. I was replying to people speculating that SF must have more than ~526 people with liquid net worth above $30M.
526 doesn't seem a low estimate to me. Unless your counting unrealized paper Gaines... Before tax, and which often do not pan out upon liquidation the way a naive reading would imply they will on paper.
526 doesn't seem a low estimate to me. Unless your counting unrealized paper Gaines... Before tax, and which often do not pan out upon liquidation the way a naive reading would imply they will on paper.
$30 million is a high bar. If someone's making it in tech, with investors and other stockholders you'd have to have a $100 million+ exit as a founder. There are more in SV than anywhere else, but still few in an absolute sense.
The other option is that they were somewhat early in something that took off like Google/Facebook, that's still probably not more than a few dozen over the $30 million mark each. So the number makes sense to me at least.
The other option is that they were somewhat early in something that took off like Google/Facebook, that's still probably not more than a few dozen over the $30 million mark each. So the number makes sense to me at least.
I agree its a very high bar, but someone with a relatively lower exit -- say $10m, could hit the $30m mark within 15 years with a 7% annualized return, not to mention getting lucky with a winning seed investment or two.
The data is from 2013, so by your calculation the person would have had to have made the $10MM in 1998. The stock market has not had 7% returns since then, and you haven't considered the impact of taxes and using part of the gains to fund a higher standard of living.
In addition, it was much harder to make $10mm before the .com era.
In addition, it was much harder to make $10mm before the .com era.
10 basis points for a #100 employee does not seem like an accurate representation. FB was quite mature by 2009, and offers were not as high.
(Source: Offer in 2008)
> employee number 100 made $200M at Facebook
before taxes and assuming he never sold any of the stock until now
before taxes and assuming he never sold any of the stock until now
Based on what? Your Rolodex?
Original source is more interesting: http://content.knightfrank.com/research/83/documents/en/weal...
Ok, we changed the URL to that from http://fortune.com/2015/03/09/private-jet-routes/, and the title from "Private Jet: Moscow to Nice Is Most Popular Route for Private Planes".
This is purely an anecdotal evidence, but I like to walk in Pacifica, CA which is on the flight path from SFO runway 1R/19L. On the weekends, the number of private jets taking off is equal to the number of commercial jets.
In addition to the original info about the Moscow-Nice flight there (http://content.knightfrank.com/research/83/documents/en/weal...) are some more curious stats about Russians: the percentage of Russians of all UHNWIs willing to emigrate (33%), and the percentage of them who send their children to study abroad (61%). Not that the tendency was not known before though.
This was a very strange report. Skipping to the middle I thought it was about wealth in general, which seemed like a nice counterpoint to the study of poverty. I'd be very interested in reading about trends in people earning above $60,000 a year, and how the rest of the world can get there. But this was really about "Ultra high net worth individuals" which doesn't strike me as a very interesting topic.
I would be pretty interested in something like that too.
Beautiful data.
Just for example, Dustin Moscovitz says that employee number 100 made $200M at Facebook[1]. Imagine the number that made $30M, and that's just one company (see slide 14).
[1] http://www.businessinsider.com/dustin-moskovitzs-startup-adv...