Hello everybody! I lately joined an early-stage startup that provided me 40,000 ISOs at a strike worth of $0.25. They do not disclose the # of totally dilluted widespread inventory as a result of they are saying we’ll use it to calculate % of possession and it may be deceptive as the corporate grows. As a substitute, they inform us what the popular inventory worth was of their final spherical: $1.75
They are saying this info is sweet sufficient to estimate our features shall the corporate develop and have a profitable liquidity occasion as a result of all most well-liked shares are became widespread inventory. Subsequently the corporate says I can use the formulation:
Return = (preferred_stock_price x multiplier – strike_price) x num_of_isos
The place the multiplier should be estimated by me primarily based on how a lot I believe the corporate will develop.
This formulation relies on the notional worth, as defined right here: https://carta.com/weblog/value-equity-offer-startup-equity-calculator/
Additionally, their incentive plan has 4 million shares authorized (not essentially issued). They mentioned they had been requested by VCs to make a plan for the primary 100 workers, in order that they needed to approve much more inventory than was initially wanted to be issued (we’re 20 workers). Does this sound regular?
Is it affordable to estimate that if the corporate sells subsequent yr at 10 instances their present valuation (assume no additional dillution), I might roughly make (1.75 x 10 – 0.25) x 40,000 = $690,000 ?
I do know this isn’t precise monetary recommendation, blabla.
