Startup Equity Calculator FAQ

This is the FAQ for

Why did you make

I see lots of people at startups who don’t understand what their stock packages are worth. Stock options are complicated, and startups intentionally obfuscate the value of their options to make it hard to compare against public company compensation packages.

This calculator cuts through that FUD, and provides a simple financial model for the worth of a startup stock option package.

Know your worth.

What if I don’t know the company’s total number of outstanding shares?

Ask the recruiter! Or, your corporate lawyer, or your finance team. This is corporate confidential information, but you need to know this number to calculate the value of your stock package. Do not accept any excuses about why they cannot give you this number.

How do I estimate the IPO valuation?

The recruiter will give you a best-case valuation. I like to also consider a worst-case valuation, and then a likely average case. As a reference point, companies typically need to hit a minimum valuation of $1-1.5B to IPO, but do your own research.

Also, remember that most startups fail, in which case your stock options are worth zero.

How do I estimate the number of rounds through IPO?

Every company is different, but look at the path of companies in a similar space. Here are a few rules of thumb that might be helpful:

  • It typically takes 8-10 years (or longer!) from founding for a company to IPO. Examples: Facebook (8 years), Zoom (8 years), Slack (10 years), Uber (10 years), Atlassian (13 years)
  • This means a Series E, F, or beyond is common before going public.
  • A company needs to be worth at least $1B to go public.

However, every company is different. The advent of super-huge late stage funding rounds has also warped the IPO market, with companies staying private longer than ever.

What about taxes?

This is a complicated topic that depends on your personal financial situation. Because of this, the calculator only computes pre-tax income.

If you want to learn more, I recommend Carta’s Equity 101 series. Tax implications are covered in part 3. I also recommend consulting with a certified tax professional, since a few hundred dollars now could save you thousands of dollars later.

When should I exercise my options?

This is a complicated topic that depends on your personal financial situation. Carta’s Equity 101 series will help you understand the relevant factors, but again I recommend consulting with a certified tax professional if you have questions.

What if my company is beyond Series E?

Beyond Series E, it’s rare for a company to be giving out stock options to new employees. At this point, the strike price is high enough (and the upside low enough) that companies typically switch to giving out RSUs (Restricted Stock Units) instead.

If you are in this situation, you can simply use Series E as the current funding round and fill in your actual expectation for the number of rounds through IPO.

What if I have RSUs, not stock options?

The good news is it’s much simpler to calculate the value of RSUs since there is no strike price. There also aren’t any tax timing games since RSUs are taxed as regular income at the time they become liquid.

Total dilution = (1.15) ^ (Number of additional funding rounds through IPO)
Price per share = (Company valuation at IPO) / ((Total number of outstanding shares) * (Total dilution))
Value of your equity = (Your # of RSUs) * (Price per share)

What is dilution and how is it calculated?

When there’s a new funding round, the company issues new shares to the new investors. This increases the total number of shares of the company, diluting existing investors.

Since these new investors want significant control over the company (e.g. a board seat), dilution per round is typically 15-25%. Usually, the later the round, the less dilution, but there’s no absolute rule.

The calculator uses a simple model for dilution based on this 15-25% range.

Companies also periodically issue new shares to refresh the employee “option pool” which is granted to new hires etc. This is already factored into the calculator’s dilution model, but you can add another round to IPO if you want to project more dilution.

How do you calculate valuation per round?

Linearly! The only number that really matters is the IPO valuation. The intermediate private round valuations are a way of gauging company progress, but what you really care about is the valuation when you can turn your paper money into actual money (i.e. the IPO).

During late-stage private rounds, companies sometimes allow employees to sell their shares through a tender offer. However, tender offers are not guaranteed, and can come with restrictions on who can participate, the price-per-share, and number of shares that can be sold.

I want to tweak things or track my equity on an ongoing basis

This calculator is really only meant for evaluating a stock package when you join a company. For ongoing tracking, I recommend a spreadsheet. Here is an example spreadsheet very similar to the one I use, feel free to save your own copy and make edits.

Is my information safe?

Yes. None of the information entered into the calculator leaves your browser. The calculator is implemented entirely in client-side JavaScript. I wrote this calculator as a public service, not to make a buck.

Where’s the source code?

Glad you asked! The calculator can be found on Github at umbrant/startupequity.