Startup Stock Vesting CalculatorJan 14, 2023
Most Workers Don’t Know Their Stock’s Value
Founders and other startup employees need to know how much their stock grant is worth. Sadly, many entrepreneurs lack a solid understanding of the value of their startup’s stock, leaving them ill-equipped to explain it to potential employees, contractors, and advisors. If you can’t articulate the plausible value of the equity compensation package, you’ll have a very hard time attracting top talent to your venture.
Do the Math
Fundable Startups will soon release a complex, advanced modeling tool to project the potential value of a stakeholder’s stock, considering the dilution of several rounds of funding. (This tool will be part of our Startup Roadmap: Founders and Formation class, which is included with the purchase of any of our training packages.) However, we also provide a simple tool to estimate the value of a worker’s vested and unvested stock grant. After inputting some basic information about the grant and the startup’s estimated valuation, the Excel spreadsheet embedded below calculates the stock grant’s value.
Here's what you need to enter in the orange-shaded cells:
- Stakeholder name: the person receiving the stock.
- # of shares subject to vesting: the number of options (or shares) in this single grant.
- # of fully diluted shares: the total number of shares in the company. This non-trivial concept is important to determine the percentage ownership stake in the company. For a visual explanation of fully diluted shares, watch our YouTube video here.
- Date of this calculation: the effective date to use when calculating the vesting progress. You would typically enter today’s date, but it’s also possible to enter a future date to understand your stake after three, six or any number of additional months of vesting.
- Assumed startup value: the estimated valuation of the startup. Typically, you would enter the value of the company today. However, if you assume the startup will grow, you could also enter a larger estimated value if want to see what your stake might be worth if the startup blossoms.
- Vesting start date: the date that your stock grant begins vesting. For most situations, this is the date the worker began working at the startup (i.e., your hire date).
- Vesting duration: the number of months before the equity grant fully vests. Most employee grants vest over a 48-month period.
- Vesting cliff (if any): the number of months before any of your stock vests. Most employee grants have a 12-month cliff (which means none of the stock vests before the worker’s one-year anniversary with the company).
Get Your Equity Compensation Right
It’s too easy to offer too little or too much equity to incoming workers. (We plan to write a separate blog on this topic later.) The simple best practice is to use our startup stock calculator tool to visualize the estimated value of a stakeholder’s equity position, especially as you consider how much of the equity will vest over time.
Running some simple calculations is a step in the right direction. Even better would be to use the advanced modeling tool which will be in our Founders and Formation class to factor in the impact of dilution after raising multiple rounds of funding. (Feel free to reach out to us at [email protected] if you would like to participate in the beta release of this tool.) Regardless of whether you choose a basic, simple estimate or a more accurate, advanced projection that considers future dilution, make sure you understand the probable value of your equity compensation to avoid overpaying or underpaying for talent.