Simple Option Calculator

8/13/2019 Simple Option Calculator

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This file complements a blog post I wrote, which you can find here:

If you find an error, please let me know, so I can correct it for everyone - Thanks

Personal Assumptions

Percentage ownership of your seed-funded company:

Your effective income tax rate:

Number of years to an IPO:

Number of years to an M&A exit:

Your cost of capital:

Dollars invested by the seed investor:

Seed investor's ownership of the company:

Percentage chance your company has an average disclosed M&A exit:

Percentage chance your company has an average IPO exit:

Expected present value of your options at M&A exit:

Expected present value of your options at IPO exit:

Total expected present value of your options:

Increase in your salary over four years that would make you indifferent to options:

Backup Data and Work:

Money Tree

Seed

Early Stage

Expansion

Later Stage

Grand Total

Seed

Early Stage

Expansion

Later Stage

Average Investment at Seed

Valuation Assumed 30% Ownership VC


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Average Investment at Early Stage


Average Investment at Expansion


Average Investment at Late Stage


IPOs

Number

Mean Age of IPO

% as number of seed funded of 7 Previous Years

Valuations

Average

Average 6-month Return on VC-backed investment 2007-2011

Estimated 3-year Valueation

Expected Value

M&A

All Deals

Deals with Disclosed Price

Disclosed M&A Value

% as number of seed funded of 4 Previous Years - Used Announced Deals to be consi

Value/Deal * Probably not representative of the deals without disclosed price, but usExpected Value

The Average Option Grant

Options

Seed Capital Invested (average 2001-2012)

Ownership After Investment - Valuation

Strike Price

Early Stage Capital Invested (average 2001-2012)

Expansion Stage Capital Invested (average 2001-2012)Late Stage Capital Invested (average 2001-2012)

M&A Assumptions

- Only 1 extra round of funding. Both investors get 1x Liquidation Pref and participat

- Employee does not receive a second option grant


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Years after Seed Funding to Exit

Average M&A Exit 2008-2012

Assume Seed VC Receives 1x Liquidation Pref

Assume Early Stage VC Receives 1x Liquidation Pref

Assume Expansion Stage VC Receives 1x Liquidation Pref

Ownership of Early Stage VC

Options Ownership after Second Round - First VC has no dilution protection

Ownership of Expansion Stage VC

Options Ownership after Round 3

Value of M&A after Liquidation Pref

Option Valuation

Subtract Strike Price

Effective Income Tax Rate

Payout from Option Grant Assume Full Vesting

Average % of Seed Startups With Represented Acquisition Price after 4 Years (2008-2

Expected Payout Based on % of Seed Startups Acquired after 4 Years

Present Value Factor

Present Value of Expected Payout

Present Value of Total Expected Value of Options

Year

Salary Increase Required to Forgo Options

Present Value Term

Total Present Value

Difference


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Blog Post

Your Assumptions

(Leave Blank if You'd

Like to Use Defaults

and Averages) Research Sites

1 https://www.pwcmoneytree.com/

2 https://docs.google.com/file/d/0B

3 http://www.marketwire.com/pres

4 http://www.nvca.org/index.php?o

Payouts

10,082

11,831

21,914

7,676

https://www.pwcmoneytree.com/MTPublic/ns/index.jsp

2000 2001 2002

704 279 181

2,851 1,296 876

3,700 2,391 1,581

782 621 564

4,587 3,202

3,157,737,600 800,727,500 340,159,400

25,286,050,100 8,578,639,800 3,969,646,500

59,081,156,900 ############ ############

17,600,475,800 8,667,612,500 5,730,939,100

4,485,423 2,869,991 1,879,334

30% 14,951,409 9,566,637 6,264,446
http://bit.ly/1dFlciThttp://bit.ly/1dFlciT


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8,869,186 6,619,321 4,531,560

25% 35,476,745.14 26,477,283 18,126,240

15,967,880 9,580,804 7,668,779

20% 79,839,401 47,904,020 38,343,895

22,507,002 13,957,508 10,161,240

15% 150,046,682 93,050,054 67,741,597

2008 2009 2010 2011

7 13 70 51

7 7 6 7

0.3% 0.6% 2.8% 1.9%

3,645 9,192 111,386 94,987

521 707 1,591 1,862

10.5%

575.39 781.32 1,758.31 2,058.05

1.92 4.32 48.42 38.36

16236.9 281.890625 415.890625

422 360 544 498

134 109 149 169

16,237 12,365 17,700 24,093

9% 6% 8% 9%

121 113 119 14311.45 7.20 9.68 13.07

0.5%

3,195,669

10,652,229.70

53,261

5,000,251

8,363,2009,854,671

IPO Assumptions

. No dilution protection - 3 extra rounds

- Employee does


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TPublic/ns/index.jsp

lJl7UfVCAeaFB6Zlk1OEFjbmM/edit?usp=drive_web

-release/venture-backed-ipo-exit-activity-more-than-doubles-q22013-with-strongest-quarte

tion=com_content&view=article&id=257&Itemid=103

2003 2004 2005

216 234 263

799 903 857

1,355 1,201 1,115

653 884 1,061

3,023 3,222 3,296

365,730,500 951,624,700 997,050,500

3,608,527,500 4,045,870,200 4,047,486,100

9,802,553,800 9,045,158,900 8,607,941,500

5,907,312,200 9,194,457,000 9,942,011,700

1,693,197 4,066,772 3,791,067

5,643,989 13,555,907 12,636,888


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4,516,305 4,480,476 4,722,854

18,065,219 17,921,906 18,891,417

7,234,357 7,531,356 7,720,127

36,171,785 37,656,781 38,600,635

9,046,420 10,400,969 9,370,416

60,309,466 69,339,796 62,469,442

2012 Data from NVCA

49 NVCA Yearbook 2013

8 NVCA Yearbook 2013

1.7% 1.4%

122,264 NVCA Yearbook 2013

2,495

https://docs.google.com/file/d/0B6lJl7U

2,757.18

45.83

479 http://www.marketwire.com/press-relea

128 http://www.marketwire.com/press-relea

21,996 http://www.marketwire.com/press-relea

16% 10%

172 13427.92

f funding. All Investors get 1x liquidation Pref. Participate after Liq Pref No dilution protecti

ot receive a second option grant


9/15

unding to IPO 7

ars) 0.5

ation 3 Years Out 1,586,049,297

Receives 1x Liquidation Pref 3,195,669

e VC Receives 1x Liquidation Pref 5,000,251

n Stage VC Receives 1x Liquidation Pref 8,363,200

e VC Receives 1x Liquidation Pref 9,854,671

ly Stage VC 25%

ip after Round 2 0.38%

ansion Stage VC 20%


Stage VC 15%


Liquidation Pref 1,559,635,505

3,977,071

ice 3,923,809

ax Rate 40%

on Grant Assume Full Vest 2,354,286

d Startups IPO'd after 7 Years (2008-2012) 1.4%

Based on % of Seed Startups IPO'd after 7 Years 33,749.30

tor 15%

Expected Payout 11,831.26


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-biotech-1807323.htm

2006 2007 2008 2009 2010

395 526 534 374 410

1,000 1,130 1,139 973 1,272

1,382 1,276 1,244 888 1,074

1,109 1,285 1,251 903 869

3,886 4,217 4,168 3,138 3,625

1,283,187,900 1,831,252,900 1,909,283,300 1,734,190,800 1,667,778,700

4,718,849,300 6,078,012,600 5,738,010,500 4,906,563,200 5,867,002,500

11,162,688,300 11,081,616,700 10,872,070,500 6,814,111,600 8,697,647,500

10,412,594,300 12,895,792,000 11,434,644,500 6,776,560,000 7,078,901,300

3,248,577 3,481,469 3,575,437 4,636,874 4,067,753

10,828,590 11,604,898 11,918,123 15,456,246 13,559,176


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4,718,849 5,378,772 5,037,762 5,042,717 4,612,423

18,875,397 21,515,089 20,151,047 20,170,866 18,449,693

8,077,198 8,684,653 8,739,607 7,673,549 8,098,368

40,385,992 43,423,263 43,698,033 38,367,745 40,491,841

9,389,174 10,035,636 9,140,403 7,504,496 8,146,031

62,594,495 66,904,239 60,936,022 50,029,974 54,306,876

VCAeaFB6Zlk1OEFjbmM/edit?usp=drive_web

se/venture-backed-ipo-exit-activity-more-than-doubles-q22013-with-strongest-quarter-biotech-1



on


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2011 2012

446 283

1,576 1,682

1,020 967

922 838

3,964 3,770

1,074,662,600 743,723,800

8,801,655,500 8,001,557,800

9,823,627,200 9,397,882,300

9,851,503,000 8,730,980,500

2,409,557 2,627,999

8,031,858 8,759,998


14/15

5,584,807 4,757,169

22,339,227 19,028,675

9,631,007 9,718,596

48,155,035 48,592,980

10,684,927 10,418,831

71,232,849 69,458,874

807323.htm

807323.htm

807323.htm


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Simple Option Calculator