Do the math on your stock options
1–10 of 259 posts
Re: Do the math on your stock options
#2I'm really interested in other people's experiences with understanding how their stock options work.
It seems really easy to misunderstand something serious, even if you know quite a lot about equity.
Re: Do the math on your stock options
#3This is an excellent article. Thank you.
The thing that is missing from all of these articles is, unfortunately, a tool to actually do these calculations. I am building such a tool. Happy to share (privately!) an early version. If you're interested, email is in my profile.
Re: Do the math on your stock options
#4[deleted]
Re: Do the math on your stock options
#5I'm really interested in other people's experiences with understanding how their stock options work. It seems really easy to misunderstand something serious, even if you know quite a lot about equity.
I got an offer from a late-stage (not sure if that's the right term, but they had a shipping product) non-public startup that included 10,000 stock options. That sounded like a lot, but I had problems evaluating that number without knowing the shares outstanding. I asked for that figure, and was told it was privileged and confidential.
I decided to value the options at $0, and instead think of them like a non-monetary perk: "free lotto ticket Wednesday". I ended up turning down the offer.
Was that experience normal? Did I have a right to know the shares outstanding?
Re: Do the math on your stock options
#6I have always just asked this one simple question:
- What is the price per share at current valuation?
I don't think it's has to be that complicated...
Re: Do the math on your stock options
#7Even when the maths is simple, few people seem to do the maths. The number of reasonably bright friends I have who say "I've got some equity, so if it goes big I'll make great money", but haven't actually sat down and calculated that "great money" is a one-off £50k astounds me.
Re: Do the math on your stock options
#8This covers a lot of the more important things -- certainly to the individual. But one thing that you need to keep in mind in terms of predicting the actual value of the options, which is outlined in the "More ambitious questions" section is things like overhanging liquidation preferences, participation rights, downside protection for investors, etc. Ask these questions.
Re: Do the math on your stock options
#9I'm really interested in other people's experiences with understanding how their stock options work. It seems really easy to misunderstand something serious, even if you know quite a lot about equity.
I got an offer from a late-stage (not sure if that's the right term, but they had a shipping product) non-public startup that included 10,000 stock options. That sounded like a lot, but I had problems evaluating that number without knowing the shares outstanding. I asked for that figure, and was told it was privileged and confidential. I decided to value the options at $0, and instead think of them like a non-monetar…
You did the right thing. The situation is analogous to someone telling you the numerical amount of your proposed salary, but not telling you the currency and/or frequency. You don't have a right to know the details, but without the details it's hard to evaluate them as worth more than 0.
Re: Do the math on your stock options
#10What protects the stock from being diluted since presumably it has no or insufficient voting rights?