{Salary Or Equity}

You can think of your equity as worth $______ per year in salary.

{1. INITIAL FUNDING}

The company has taken funding equal to $ at a $ post-money valuation.

This means they sold % of the company for and implies that the total value of the company is .

They are offering you shares out of the shares they have issued.

This means you would own % which is worth at the current post-money valuation.

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{3. RISK AND PAYOFF}

Now there is always a chance a startup will fail, so we apply a risk factor to it.

Because your portion is worth only if the company sells, you have to decide how likely that is.

If, for example, you believe the company has a % chance of selling for the valuation of , then the expected value of your equity is .

You also won't get all your equity at once; usually there is a vesting period, meaning you get some amount for each month or year that you work. So let's say your % share is paid out over years.

{2. ADDITIONAL FUNDING}

Over time, you may get diluted. This happens because the company has to take in more money in order to get to a place where it can sell itself (hence A Round, B Round, etc.) This can actually be a good thing, because it means the company is growing and increasing in value.

So imagine they took in another $ at a $ post-money valuation.

Because they would issue new shares, your % of the company is now only %.

But because the company is now valued at your portion is worth .

NEXT STEP

That means you can think of your equity as worth $______ per year in salary .

a work worth doing project by natalia rodriguez and matt wallaert

* This tool is not a crystal ball; your equity could eventually be worth a lot more or a lot less. But equity does have a potential value and while many startups fail, you join a startup because you believe it will succeed and because your efforts make that success more likely.