TRIPLEBYTE STARTUP EQUITY VALUE CALCULATOR
The final value of your startup equity is a calculation based primarily on the percent of the company that you own and the final exit valuation of the company. Use the calculator below to estimate the value of your startup equity based on different exit values.
Projecting the exit value of a startup is a notoriously difficult task, as the final valuation is ultimately determined by the open market. To help give some perspective on the likelihood of different exit valuations, we’ve provided a dataset of over 2,000 Y Combinator startups and their exit valuations.
Disclaimer: This is not legal or tax advice, and exercising equity options may incur a wide range of tax ramifications. You should talk to a professional before making any decisions.
Startup Equity Value Calculator
Enter different inputs and scenarios to see how the final value of your startup company equity value may turn out.
15 Years of Real Startup Outcomes
This 15-year, Y Combinator startup exit data set offers insight into the likelihood of different exit valuations.
Company Outcomes - 2,203 Companies
Known Exits by Valuation - 81 Companies
39.5%
43.2%
17.3%
About the YC Company Data Set
The startup outcomes data set uses data from 2,000+ Y Combinator (YC) companies founded between 2005 to 2020. YC companies are not your average startup. Competition for a YC slot is fierce and many applications are rejected. Only startups with a high potential for success (based on their product, founders/team, industry, etc.) are selected to join a YC cohort, which means these may not be an appropriate comparison for all startups. This data set is derived from Y Combinator and Crunchbase, and was last updated on October 27, 2020.
FAQ & Glossary
Again, that’s a judgement call at the time you leave your current company, and is dependent on your strike price and exercise window (among other things). The strike price of your options is what it will cost you to exercise them, aka buy shares of the company. Your exercise window is the period of time the company allows you to exercise (buy) after your last day of employment. This can range from as little as 90 days up to many years. We’ve written here about why Triplebyte offers our employees a 10 year exercise window.
Only you know whether you can spare that kind of cash outlay for a non-guaranteed outcome. If you think your company is likely to make a high-value exit, it may be a good idea to exercise your options, but it’s always a risk and each situation is different. We recommend discussing all of the details, including your strike price, number of options, personal budget, and likelihood of an exit, with a financial advisor at the very beginning of your exercise window so that you have time to make the decision.
Authorized shares are the total number of shares that a company can issue. This is usually decided when the company forms, and can be any arbitrary number. Outstanding (issued) shares are the portion of the authorized shares that have actually been issued or granted. Generally, companies will keep some portion of authorized shares in reserve so they can offer them as equity grants for future employees.
We typically see somewhere around 10 million authorized shares for early stage companies. For example, a company with 10 million authorized shares, which has issued 80% of its shares (AKA has 8 million outstanding shares) and has a 409A valuation of $8 million would have a $0.10 price per share.
Dilution is the process by which your ownership percentage is reduced. Every time a startup raises a new round of funding, new shares are created to sell to investors, making existing shares a smaller percentage of the new total. This dilutes your ownership percentage over time, but the good news is that it generally increases the value of your options!
Example: You own 10% of a company valued at $1 million. This translates to a stake in the company worth $100,000. It's time to raise another round of funding, so a 409A valuation is performed, valuing the company at $8 million (pre-money). You decide to raise another $2 million, bringing the post-money valuation of the company up to $10 million, but also translating to a 20% dilution. You now only own 8% of the company, however, your stake is now worth $800,000.
Equity is the overall term used to represent your ownership interest in a company. Companies want to incentivize employees by offering a meaningful stake in the company, which generally works in both parties' favor. Basically, as a company grows, that new value is reflected in the rising value of an employee's equity grant.
- Liquidation: the startup is not worth much to others, so the investors try to get back what value they can and close the company
- Acquisition: investors sell the startup to a larger company
- IPO: investors take company public, selling shares on the open market (this is both the most rare and usually the most lucrative for those with equity grants)
Golden handcuffs refers to how employees can be heavily incentivized to stay at a company, potentially longer than they'd like. Late stage companies are sometimes accused of delaying their IPOs, knowing that employees with equity will stick around until the hopeful exit.
An option refresher is an additional equity grant given during your employment. As startups grow, employees will often be offered option refreshers along with raises as part of a promotion. New options and RSUs generally come with their own associated vesting schedules.
Example: You take a new job with an equity grant of 1,000 options with the standard 4 year vest, 1 year cliff vesting schedule. Two years later, you are offered a promotion that comes with an additional 2,000 options, also with a 4 year vest, 1 year cliff vesting schedule. You’ve already vested 500 of your original options, but it will be another year before you can begin vesting from the new 2,000 option pool — the one year cliff on option refreshers generally starts at the time of the grant, not of your original date of employment.
When a company wants to finance a new investment round, a 409A valuation is typically done to determine an updated fair market value. Assuming the company then goes on to raise more money, the pre-money valuation would be the value of the company before the investment round, and the post-money valuation would be the pre-money valuation + the amount of money raised. For an employee with equity, you may see some dilution occur. The overall value of your equity may not change from pre-money to post-money, but your ownership percentage might.
Is the only way to profit on startup equity to wait for the company to exit? Not necessarily! There are also secondary markets, which are platforms where private company stock can be sold to other private parties. Not every company will allow their equity to be traded this way, and it may be traded at a slight discount. You’ll want to check with a tax professional for advice before diving into a secondary market.
The strike price is a pre-defined price at which you can purchase a stock option. The strike price is generally equal to or based on the fair market value of the company, which is usually determined by the current 409A valuation.
Example: Your option grant offers you a $0.45 strike price. It's been a year so you're past your vesting cliff and can now exercise your right to purchase these options. Over the past year, the company has been in hyper-growth mode and the value of the stock is now $1.00 per share, indicating a potential profit of $0.55 per share, if you were to exercise. Check out the glossary entries for exercise windows, exits, and secondary markets to learn more about how strike price is just one aspect of the decision of when (and whether!) to exercise.
A vesting schedule determines when and what amount of your stock options will be available for you to purchase over time. Typical vesting schedules in the startup world are 4 year vesting, 1 year cliff. That means 25% of your options would vest after your first year of employment, after which, a portion of the remaining 75% would vest monthly (or quarterly). New stock grants generally come with a separate, new vesting schedule.
Example: You are awarded 1,000 stock options with a 4 year vest/1 year cliff schedule. You'll earn 25%, aka 250 options, all at once on your one year anniversary (aka the 1 year cliff). You'll vest the remaining 750 options equally each month over the next 3 years. If you leave the company before your 1 year cliff date, you get no options. If you leave after year one but before the end of year 4, you'll get whatever you've earned up to that point.
