Question 1

How is my startup equity actually worth?

Accepted Answer

Multiply your fully diluted ownership percentage by the company's exit valuation, then subtract the cost to exercise your options. Adjust ownership downward for future rounds: 0.5% today is roughly 0.26% after three more rounds at 20% dilution each. The calculator above runs this end to end.

Question 2

What is a 409A valuation?

Accepted Answer

An independent appraisal of the fair market value of common stock. Used to set the strike price on employee options so the IRS does not treat the grant as taxable income at issuance. Refreshed annually or after any material event (round, acquisition offer, etc.). The 409A is usually well below the price preferred-stock investors paid because common stock lacks liquidation preference.

Question 3

When should I exercise my options?

Accepted Answer

It depends. Early exercise (with a timely 83(b) filing) starts your capital gains clock and can be tax-efficient if the strike is low. Wait until exit and you avoid upfront cost but pay ordinary income on the spread for non-qualified options. ISOs have AMT implications if you exercise when current price is well above strike. There is no universal answer; consult a tax advisor with your specific numbers.

Question 4

What is the AMT trap?

Accepted Answer

When you exercise ISOs and the current 409A is well above your strike price, the spread is treated as preference income for Alternative Minimum Tax. You may owe AMT in the year of exercise even though you have no cash from the shares. People have ended up with five and six-figure AMT bills on options they could not yet sell. The calculator above shows your AMT spread.

Question 5

What happens to my options if I leave the company?

Accepted Answer

Vested options typically have a 90-day post-termination exercise window. Miss it and the options expire. Some companies offer extended windows (up to 10 years) but most do not. Unvested options are forfeit. If you need cash to exercise and lack it, secondary markets sometimes offer loans against the value of vested options.

Question 6

Should I negotiate share count or percentage?

Accepted Answer

Always ask for both, and ask for the company's current fully diluted share count. A grant of 50,000 shares means nothing without knowing if the company has 1M total shares (5% ownership) or 100M total shares (0.05%). Reputable companies disclose both. If they refuse, that is a signal about how they view their employees.

What is my startup equity worth

What is my startup equity worth

Employee equity FAQ