> Your 40% is worth $400k based on that initial funding valuation, right?
One quibble. That is typically not how it works, since his shares are likely common stock and investors get preferred stock. In my experience, the range of value for common stock in private firms varies widely, but it is never one to one with preferred stock (the golden rule being, of course, "who has the money makes the rules").
I have seen values ranging from 10% to 30% of the preferred stock price. Now, of course, I only have a few data points, so ymmv, but founders shouldn't delude themselves that their sweat equity is valued the same as preferred stock.
One quibble. That is typically not how it works, since his shares are likely common stock and investors get preferred stock. In my experience, the range of value for common stock in private firms varies widely, but it is never one to one with preferred stock (the golden rule being, of course, "who has the money makes the rules").
I have seen values ranging from 10% to 30% of the preferred stock price. Now, of course, I only have a few data points, so ymmv, but founders shouldn't delude themselves that their sweat equity is valued the same as preferred stock.