The following calculator enables workers to see what their stock options are likely to be valued at for a range of potential price changes. Enter the current stock price of your company, the strike price of the options, the number of options you are entitled to & an anticipated growth rate in the value of your company.
After you have completed your calculation click on [View Report] to see how your options change in value over time & then click on the [Print] button if you would like to print your results.
The following calculator is for one-time issuance of stock options. We also offer employees an annual stock option grants calculator.
Employee stock options can offer great returns, but not without risk & often with sigificant income tax consequences. Many homeowners take out a HELOC to manage their cashflow while awaiting vesting.
Our rate table lists current home equity offers in your area, which you can use to find a local lender or compare against other loan options. From the [loan type] select box you can choose between HELOCs and home equity loans of a 5, 10, 15, 20 or 30 year duration.
The following table shows an example of how much stock option values would be at various growth levels for an employee who obtained 5,000 options at a strike price matching the current company share price of $20 per share.
| End of Year | 8% Growth | 10% Growth | 13% Growth |
|---|---|---|---|
| 1 | $8,000 | $10,000 | $13,000 |
| 2 | $16,640 | $21,000 | $27,690 |
| 3 | $25,971 | $33,100 | $44,290 |
| 4 | $36,049 | $46,410 | $63,047 |
| 5 | $46,933 | $61,051 | $84,244 |
| 6 | $58,687 | $77,156 | $108,195 |
| 7 | $71,382 | $94,872 | $135,261 |
| 8 | $85,093 | $114,359 | $165,844 |
| 9 | $99,900 | $135,795 | $200,404 |
| 10 | $115,892 | $159,374 | $239,457 |
Over the past decade many startups have raised funds not only to raise capital to growth their company, but also as part of their marketing strategy. Raising money at a billion Dollar valuation qualifies a company as a unicorn. That will guarantee tech blogs like TechCrunch cover the investment, building brand awareness & perhaps helping the company recruit employees. Investors who invest in companies at valuations which exceed the actual present value of a start up might have liquidation preferences, participation preferred stock, or full ratchets to limit their downside.
Liquidation preference ensures the investor is made whole before others in the cap table get any payout. This is referred to as a 1X liquidation preference, which is the venture capital industry standard. In some cases, investments at steep valuations may come at a 2x or 3x liquidation preference, guaranteeing the investor gets at least double or triple their money back before common shareholders obtain any funds in a liquidity event (such as the company going public, getting acqured, or going through bankruptcy).
Some investors also obtain participation rights, which enable them to obtain the value of preferred stock converted to common & their liquidation preference amount.
When companies raise funds across multiple rounds typically later rounds have preference over investors in earlier rounds, though in some cases investors participate in multiple rounds & maintain liquidation preferences pari passu.
Another form of investor protection is called a full ratchet, which is a tool to prevent dilution by converting an investment into shares at a lower price if the company raises money at a lower valuation in the future. For example, if an investor buys 20% of a company at $12 per share & the company later raises funding at $6 per share, the investor can then convert their investment price to the $6 share price, thus granting themselves double the shares they originally had.
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