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How to calculate the cost of stock options?

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-1

I'm considering working with a startup (not public). As part of my package they have agreed to grant me a 1% stake in the company over 4 years vested every year. This means that if I left after 2 years I would have .5% of a stake vested in the company. When I asked if I would have to put up any of my own money if I left early in order to keep my .5% stake in this example they said that I would have to purchase them based on their current "valuation" of the company.

So in this situation they "value" their company at $100,000,000. In order to get my .5% stake I would have to pay them:
.005 * 100,000,000 = $500,000

Or I could decline and leave with nothing.

From what I understand their previous round of investment valued the company at much less than this - probably something closer to $5,000,000. The $100,000,000 figure is a valuation (somewhat optimistic imo) that they are attempting to achieve in their next round of funding.

I haven't worked with Stock Options before - only RSUs which seem much simpler. My question - is this standard operating procedure for Stock Options? If not - what is the correct way to calculate how much one would need to spend in order to keep their partially vested stock options when leaving a not-public company?

job-offer startup

share|improve this question

asked 44 mins ago

BrhBrh

12811 silver badge44 bronze badges

• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  I'm voting to close this question as off-topic because it doesn't belong on this stack. Maybe try finance S.E?
  
  – solarflare
  31 mins ago
  

  
  
  
  

add a comment | 

-1

I'm considering working with a startup (not public). As part of my package they have agreed to grant me a 1% stake in the company over 4 years vested every year. This means that if I left after 2 years I would have .5% of a stake vested in the company. When I asked if I would have to put up any of my own money if I left early in order to keep my .5% stake in this example they said that I would have to purchase them based on their current "valuation" of the company.

So in this situation they "value" their company at $100,000,000. In order to get my .5% stake I would have to pay them:
.005 * 100,000,000 = $500,000

Or I could decline and leave with nothing.

From what I understand their previous round of investment valued the company at much less than this - probably something closer to $5,000,000. The $100,000,000 figure is a valuation (somewhat optimistic imo) that they are attempting to achieve in their next round of funding.

I haven't worked with Stock Options before - only RSUs which seem much simpler. My question - is this standard operating procedure for Stock Options? If not - what is the correct way to calculate how much one would need to spend in order to keep their partially vested stock options when leaving a not-public company?

job-offer startup

share|improve this question

asked 44 mins ago

BrhBrh

12811 silver badge44 bronze badges

• 
  
  
  

  
  

  
  
  
  
  
  

  
  
  I'm voting to close this question as off-topic because it doesn't belong on this stack. Maybe try finance S.E?
  
  – solarflare
  31 mins ago
  

  
  
  
  

add a comment | 

I'm considering working with a startup (not public). As part of my package they have agreed to grant me a 1% stake in the company over 4 years vested every year. This means that if I left after 2 years I would have .5% of a stake vested in the company. When I asked if I would have to put up any of my own money if I left early in order to keep my .5% stake in this example they said that I would have to purchase them based on their current "valuation" of the company.

So in this situation they "value" their company at $100,000,000. In order to get my .5% stake I would have to pay them:
.005 * 100,000,000 = $500,000

Or I could decline and leave with nothing.

From what I understand their previous round of investment valued the company at much less than this - probably something closer to $5,000,000. The $100,000,000 figure is a valuation (somewhat optimistic imo) that they are attempting to achieve in their next round of funding.

I haven't worked with Stock Options before - only RSUs which seem much simpler. My question - is this standard operating procedure for Stock Options? If not - what is the correct way to calculate how much one would need to spend in order to keep their partially vested stock options when leaving a not-public company?

job-offer startup

share|improve this question

asked 44 mins ago

BrhBrh

12811 silver badge44 bronze badges

share|improve this question

asked 44 mins ago

BrhBrh

12811 silver badge44 bronze badges

share|improve this question

asked 44 mins ago

BrhBrh

12811 silver badge44 bronze badges

asked 44 mins ago

BrhBrh

12811 silver badge44 bronze badges

asked 44 mins ago

BrhBrh

12811 silver badge44 bronze badges