RVNU #030: The Startup Equity Reality Check
Decoding the Startup Equity Probability
🚨 Trigger warning: This may ruin your outlook on early stage startups forever. If you’re in an early-stage startup, love your job and lover the people you work with, but have compromised cash for equity, you may not want to read this. 😬
Introduction:
I started consulting the moment I did the math in this newsletter in my head. The moment I realized the rules on the field, I knew that I had to play differently in order to win financially. This math was a genie out of the bottle moment for me.
Moving to consulting had very little to do with not enjoying working at startups, or working for often challenging CEOs and VCs that had no time for you as the CRO, because they were vicariously living through the founder. These things played into my decision, but were not the major deciding factor.
I just loved startups and wanted to stay operating at that stage of growth, working with great founders and awesome software, I just knew the chances of a meaningful exit were slim. So I had to change the way I was playing the game.
The math below is about as good as I could get it, but it’s often not a math equation. Often it’s just luck. I get that. But as a numbers guy, getting something that feels like it tracks, based on industry data, expert opinion and my own experiences makes me sleep easy.
If of course you see a massive flaw, or have a different take, I’d love to hear from you. Drop me a note. I can nerd out on this stuff ALL DAY!
Wayne
Founder & CEO, RVNU
Research Foundations
Data Source: NVCA 2024 Venture Monitor Sample Size: 1,308 Series A Companies
Probability Calculation Breakdown
P1: Exit Probability
Total Companies with Exit > $500M: 40
Total Series A Companies: 1,308
Annual Exit Rate: 40 ÷ 1,308 = 3.1%
4-Year Window Exit Probability: 3.1% × 4 = 12.4%
P2: Liquidation Preference Clearance
Probability of Exit Value Exceeding Liquidation Preferences: 40%
Based on Bill Gurley's Analysis
Most Series A Companies Raise: $50-300M Total Capital
Need Exit Value: 1.5-2x Total Capital Raised
P3: Company Selection
Baseline Probability: 100%
No Superior Ability to Pick Winners
Must Choose a Company in Each 4-Year Window
Compound Probability Calculation
Probability per Company:
P(Meaningful Payout) = P1 × P2 × P3
12.4% × 40% × 100% = 4.96%
40-Year Career Scenario: 10 Companies
Probability Calculations
Probability of No Payout per Company: 95.04%
Probability of No Payouts in 10 Companies: (0.9504)^10 = 60.5%
Probability of At Least One Payout: 1 - (0.9504)^10 = 39.5%
Career Payout Outcome Distribution
Zero Meaningful Payouts: 60.5%
One Meaningful Payout: 30.8%
Two or More Payouts: 8.7%
Expected Payouts
Total Companies: 10
Probability per Company: 4.96%
Expected Meaningful Payouts: 10 × 4.96% = 49.6%
Summary
You’ve got about a 50% chance to see a meaningful payout ($100k+) in your startup career. The reason it’s so high is because no-one I know works for 40 years doing 4 years back to back seamlessly, so this should be seen as best case! In all reality, even if you commit for 40 years, and do 10 companies for 4 years each, there’s a good chance you’ll never achieve a meaningful payout.
The conclusion today in 2025 is easy, startup equity is a statistical long shot. Prioritize base compensation and holistic career growth.
Minimizing Dilution/Maximizing Valuation
We built RVNU to rapidly improve the unit economics of SaaS startups, specifically to put founders into stronger positions when it came to raising capital. Fundamentally we exist to help founders and employees maximize the return they get in terms of learning, equity and cash.
Want to discuss how these market realities are affecting your startup?
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Methodology Notes
Assumes random selection of Series A companies
Uses 2024 NVCA venture capital data
Defines "Meaningful Payout" as $100K after-tax equity
Sources
Disclaimer: Probabilities are mathematical models based on historical data.