Computing and explaining equity outside Silicon Valley
Kahlil Corazo
31

Notes. An important detail in this process is that we have a set formula for valuation: Annual Revenue x Multiple. We use the same multiple for every transaction between ourselves and the company. So the valuation will always be in proportion to an objective metric: revenue.

Caveats. I thought of sharing this email since another entrepreneur asked me how I computed shares I gave out. She felt that this could be a solution to her employee retention issues. I’m happy to share my computation and how I explain what this means. But I don’t think this is a technique for retention. In general, I don’t think you should give out shares — it probably creates more problems than it solves. I have worked with Psalm and Val for more than 4 years, and in my particular case this made business sense, as I explain in the email. Use with caution and with adult supervision. Your milage may vary.