Billy Gallagher

@michaelxbloch All of these are good, though it worries me a bit that they seem to be somewhat universally agreed upon. Would add brand (both for consumers & no one got fired for choosing IBM) and cornered access to talent (the famous Pixar example)

This is one of the most underrated observations in tech right now. if AI commoditizes software, what's actually safe? - regulated and liability-bearing businesses (someone has to be on the hook) - anything touching the physical world (hardware, manufacturing, energy) - proprietary data sets (AI makes your data more valuable, not less) - marketplaces and businesses with network effects (liquidity > software) - operationally intense businesses (the "bad" businesses become the best ones) - cybersecurity and physical security (more AI = more attack surface)

@DogsAndSciFi @JoshDoody Yes! Great minds ha - will def cover this x.com/GallagherBilly…

@GallagherBilly @JoshDoody The brutal reality of dilution across funding rounds. What they offer you on day one is rarely what you end up with.

I was recently helping a new grad think through their job search and they asked what they should read. Here’s the short list I sent them: How To Be Successful by @sama blog.samaltman.com/how-to-be-succ… What Doesn’t Seem Like Work? By @paulg paulgraham.com/work.html Work On What Matters by @Lethain staffeng.com/guides/work-on… Build Your Career on Dirty Work by @staysaasy staysaasy.com/career/2022/09… The Guide to Getting a Job With Cold Email by @nextplayso nextplayso.substack.com/p/the-guide-to… Salary Negotiation and Don’t Call Yourself a Programmer by @patio11 kalzumeus.com/2011/10/28/don…

Super fun convo with @patio11 discussing the "what will my equity be worth if we're the next Uber" spreadsheets that are passed around every startup

I'm joined this week on Complex Systems by Billy Gallagher, the CEO of Prospect, to discuss tech equity. complexsystemspodcast.com/episodes/under… Partially inspired by a number of IRL friends/family getting into the industry recently and being bewildered.

You can listen wherever you get your podcasts and read a transcript here: complexsystemspodcast.com/episodes/under…

I've been reading @patio11 since college so it was a blast diving deep into equity rabbit holes with him on Complex Systems. Come for Patrick debunking the idea that startup options are lottery tickets, stay for a brief history of bootleg spreadsheets.

If I could only offer employees one piece of advice during this AI hype cycle, it’s this: If and when you’re presented with the opportunity, sell 20% of your holdings in a tender offer. We are probably in an AI bubble. If you work at a startup, that means tremendous opportunity and tremendous risk. In an interview with the BBC yesterday, Sundar Pichai said the AI boom has some “irrationality” and that investment cycles can “overshoot.” When asked about the bubble bursting, he said, “I think no company is going to be immune, including us.” Derek Thompson recently wrote a great essay where he makes what I think is a smart prediction: “Some people think artificial intelligence will be the most important technology of the 21st century. Others insist that it is an obvious economic bubble. I believe both sides are right. Like the 19th century railroads and the 20th century broadband Internet build-out, AI will rise first, crash second, and eventually change the world.” What does this mean if you work in tech, particularly privately held startups? You want some exposure to these rapidly appreciating companies. You probably don’t want 80%, or in many cases 100%, of your net worth in one illiquid stock. This is basically always true, but it is particularly critical today. Unfortunately, most startup employees I talk with nod along that we’re in a bubble overall, but think they work at the one exception that will continue its unabated march to a $100B market cap, if not higher. I don’t think enough people in the startup world have internalized this: there will be companies privately valued above $10B that go to zero. I’m worried many employees are going to see millions on paper evaporate, and wish they had sold 20%. If you are a VC and a few decacorns go to zero while one becomes worth $100B, that’s a great outcome. The winners pay for the losers. If you are an employee with 95% of your net worth tied up in a company that fails, that is quite obviously a disaster. You don’t need a very long memory to conjure cautionary tales. Between 2020-2022, valuations soared in a frothy market before they came crashing down. If you had perfect information, you would wait until right before the AI bubble pops to sell. But you don’t have perfect information, and when the music stops, the opportunities to sell private shares often dry up completely. There are many employees who passed up opportunities to sell their equity between 2020 and 2022, and haven’t had an opportunity to sell since. Why 20%? It’s often the max you’re allowed to sell in a tender offer, but I think companies have landed on that maximum because it’s a healthy tradeoff: it’s enough to be a meaningful amount of money, but little enough that you still have the majority of your stake invested in the company. One of the main reasons Prospect shows our company projections as a range of outcomes is that it’s helpful for framing tradeoffs like this. If you sell 20% and your company keeps going up and to the right, your remaining 80% (plus any refresh grants you get) will be worth millions, and you’ll be pretty happy. If your company loses value, you’ll be relieved you at least sold 20%. A few years ago I sold a small percentage of my Rippling shares in a tender offer. The price has more than doubled since, but I don’t think back on that decision at all. I bet if the price had gone down and I hadn’t sold, I would think about it very often.

Fascinated by how you structure employee options when you raise billions right out of the gate. I wonder if Prometheus took a similar approach to Thinking Machines Lab, offering options with early exercise at a near zero strike before formally raising. But does that then make it difficult to attract employees 100-1,000+ who get in at a much higher strike?

You can calculate AMT by hand every time you want to exercise options. Or you can just use Prospect.

This is why the best late stage privates deliberately under-price rounds, so their price follows a smooth upward trajectory for employees

@pratyushbuddiga Apple in China lives up to the hype. Highly recommend Which of these was your favorite?

Need book recommendations - feel like I’ve fallen out of love with reading last few months and need something great to get the motion back. Here’s the embarrassingly short list of what I’ve read so far this year so far - open to stuff similar or totally different.

we’re at the point in the tech cycle where the financial advisors are sending these out

Lol, I love how a company that helps employees from top firms earn more from their equity is sending out bubble guns as a playful nod to today’s “bubbly” valuations. Well played Propsect.

Walking around scaring my VC friends

@nmoryl thanks Nick!

excited to see this. congrats, @gallagherbilly on the launch!

@alexeheath thanks for covering our launch Alex!

GitHub is an under-reported part of Microsoft's AI strategy that I find fascinating. Spoke with execs there about how they want it to be the memory layer for AI coding sources.news/p/microsofts-a…

@amitvasudev_ thanks Amit! Glad you like it

@GallagherBilly This is cool. Nice work!

@thomassfoley @haridigresses thanks Thomas!

@haridigresses @GallagherBilly This is cool! Nice work

> Be me > Founding team of a leading secondary market > Stock issued 18 months after start date > Sell some stock after 45 months > Realize an on-time issuance would've been QSBS-eligible > pain.jpg > Deploy world-class equity expertise to build a sophisticated selling plan > Spreadsheet still devolves into chaos > Forgecalcs.xlsx > mf what > No one else should suffer this fate > Invest in @GallagherBilly and Prospect

Taking money off the table: zachholman.com/posts/money-of… Wrote a bit this morning about tender offers and that "oh god do I sell my stock?" decision startup employees face.