Currently working at a Series A/B stage startup. My coworker and I were talking about how we can find out how much our stock is worth/valued at (obviously our company is not best at being transparent about this kind of stuff). Do companies normally tell you how much your stock is worth when you join? If not, how do you find out about it? Through someone on the finance team? Other co-workers?
Right. I mean it's worth nothing unless you get acquired (if actually makes money) or go ipo. Just wondering how much it's valued at based on the last round of funding I guess. I feel like this is something we have the right to know.
Unless you have the ability to sell something, it's worth $0. The speculative valuation that investors give is based on hypothetical future value. For a select few private companies, there's a secondary market for options. For most, there's no way to make a profit from your options.
You should know the strike price of the options and the current valuation, if the company has had a formal evaluation. You could ask for the cap table, but it's not uncommon for companies to be resistant to sharing it. However, without knowing at least a ballpark company valuation and the number of outstanding shares, you can't really make any kind of reasonable judgement on the value of the options. If they're unwilling to share any financial information it's perfectly fair to tell them without learning more, you have to value the shares at $0.00. Either you need more information to raise the valuation of the options, or they need to revisit your TC. It's important to remember, these are options not stock. Until a liquidity event, which is rare, the aren't worth anything.
Depending on the terms of those rounds, investors get their money back first, usually at a multiple. After that, the Board may give preferences for senior leadership. Or just based on number of shares vested/planned they may outweigh you so much it doesn't matter. It's not zero but close enough to not make a difference to anyone but the IRS.
Let's say you got 10k options with a strike of 1$ If it's a series A level startup you should have direct access to one of the founders. Ask them how many shares exist. Let's imagine they say 1M. Check in crunchbase how much money the company raised in the last round. Let's say it's 10M$. As a rule of thumb the company is now worth about x4 the round, so say 40M (co-founder should have no problem telling you the last valuation) If there was no preferred stock, it'd have been straightforward to say your stock is worth 40M * 10k/1M = 400,000$ minus the 10k strike, so 390,000$. In reality, when VCs invest they often retain the right to take back a fixed return (e.g x3) before other shareholders get anything, so if the company were to sell now for 40M you would get practically nothing (remember previous round investors also get preference). But, you're not in this for the current valuation. If the startup doesn't raise valuation in a year it would close down anyway. So you want to project the potential profit in cases of success. How much would you make if the company sells for 100M a year from now? How much if they raise another two rounda, diluting you 50% but raising the valuation to 300M$, and then sell for 1B$? Combine with the chances of success and your risk tolerance and you can get a sense of their worth To YOU.
If you have spent more than a year and have a few options vested already, tell you CFO (CEO) that you are thinking/planning to exercise some of your options. They need to tell you market value at that point in time compared to your strike price for tax purpose (AMT).
Thanks for the advice guys! Actually our main objective is just to find out how much the company was valued in the last round of funding and the total number of shares issued. My coworker ended up asking our CFO in private to find out.
Did they tell you the value when you joined the company? You can ask finance in private or just some co-workers that you trust. But I'd be a bit worried if the company wants to hide that value.