Simple question on stock options worth

New
kixh58

New

kixh58
Mar 2 9 Comments

If I have 0.5% equity of a Series B startup at a 400M valuation, does that mean my stock options are currently worth 400M * 0.5% = 2M?

If the above is true, if the company valuation becomes 2B at Series C for example, and the dilution is 10%, is my stock options worth as such?

2B * 0.45 (90% of 0.5%) = 9M

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 TOP 9 Comments
  • New
    n9h6gatw4

    New

    n9h6gatw4
    You have to subtract the exercise cost, and also account for taxes

    And dilution is typically more than 10% per round
    Mar 2 0
  • Deloitte / Eng
    350k 4yoe

    Go to company page Deloitte Eng

    PRE
    Deloitte
     350k 4yoe
    Your stock options worth $0 realistically. Chances of series D/E going public is less than 5%. For series B it would be much much lower.
    Mar 2 1
    • Plaid / Eng
      DejR41

      Go to company page Plaid Eng

      PRE
      Amazon
       DejR41
      Important to note that going public is only 1 beneficial form of exit. And this statistic is not accurate of all forms of beneficial exits among technology firms.
      Mar 2
  • Workday
    workbot

    Go to company page Workday

    workbot
    Usually shareholder equity is valuation less investor money multiplied by 2-4 (minimum investor return multiple, usually specified in liquidation prefs).
    For example, if current valuation is 500m and investors brought in 100m with 2x multiple, then equity will be 300m.
    Mar 2 0
  • Amazon
    xtqyugqsh

    Go to company page Amazon

    xtqyugqsh
    Series B valuation success * 400,000,000 = $0 or monopoly money if you will
    Mar 2 0
  • Plaid / Eng
    DejR41

    Go to company page Plaid Eng

    PRE
    Amazon
     DejR41
    Subtract strike price from value, but sure

    Though that valuation is likely based on preferred share price, which is inflated vs. common. And, it’s not discounted to represent the risk of it not being worth anything.
    Mar 2 2
    • New
      kixh58

      New

      kixh58
      OP
      When would the gap between preferred vs common be a real thing? When we exit?
      Mar 2
    • Plaid / Eng
      DejR41

      Go to company page Plaid Eng

      PRE
      Amazon
       DejR41
      No, the gap is most pronounced before there is universal liquidity. Preferred shares get preferential treatment that limit the downside risk more than common in an undesirable outcome like liquidation.
      Mar 2