There are other replies saying you were "scammed", but just examine your own statements to see how something had to give (in this case, the common stock valuation) for anything to make sense. That is, look at your statement (emphasis mine):
> Fast forward two years and they raise again…this time at a valuation of $170M. Naturally, I assumed my $500 was worth close to $1500 on paper.
If they raised again, it's completely nonsensical to think your stock would have tripled in value. The only way to assume that's even possible is if the company tripled in value without raising more money. After all, "raising" is just another word for selling part of the company to other, new shareholders. When you sell part of something, that means the existing shareholders own less (as a percentage) of it.
Yes, there are other bad tricks companies can play with different share classes and obscene preference rights for preferred shareholders (1x is pretty standard and totally fair in my opinion, anything more than that means to me that the company needed to raise under duress or has bad management).
In other words, the outcome you described seems perfectly reasonable just by the rules of math. It says to me that many people just don't understand that "raising money" means selling a part of your company.
For sure, I think I was a sucker, not that the company was acting outside of the law.
In this case, I’m learning that my perspective on dilution is different from the founding team, who evidently feel fine tripling the share pool - as they should! Their odds of a major exit go up with millions in the bank, and the market is willing to bear that dilution, so of course they dilute.
Meanwhile, I end up feeling like I would have been better off buying $450 worth of Dogecoin and a really big pack of oatmeal crème pies.
> Fast forward two years and they raise again…this time at a valuation of $170M. Naturally, I assumed my $500 was worth close to $1500 on paper.
If they raised again, it's completely nonsensical to think your stock would have tripled in value. The only way to assume that's even possible is if the company tripled in value without raising more money. After all, "raising" is just another word for selling part of the company to other, new shareholders. When you sell part of something, that means the existing shareholders own less (as a percentage) of it.
Yes, there are other bad tricks companies can play with different share classes and obscene preference rights for preferred shareholders (1x is pretty standard and totally fair in my opinion, anything more than that means to me that the company needed to raise under duress or has bad management).
In other words, the outcome you described seems perfectly reasonable just by the rules of math. It says to me that many people just don't understand that "raising money" means selling a part of your company.