Is My Startup Equity Actually Worth Anything?

Published 2026-08-02

TL;DR

Paper value today = shares × (409A − strike). Exit value = shares × (exit valuation × (1 − future dilution) / current shares outstanding) − shares × strike. Both are before taxes. Most startup equity ends up worth zero.

The formula, plainly

Paper value today is what you’d realize if you exercised and the company had a liquidity event at today’s 409A. It’s a hypothetical; nobody buys secondary at 409A.

Exit value projects your shares to a liquidity event. Two things reduce it: future dilution (every round you weren’t part of), and strike (what you pay to convert options to shares).

Worked example

A senior engineer’s grant at a Series A company:

Strike: $0.80
Current 409A: $2.10
Shares granted: 50,000
Vesting: 4 years
Expected exit valuation: $400M
Expected future dilution before exit: 35%
Shares outstanding today: 20M

Paper value today = 50,000 × ($2.10 − $0.80) = $65,000.

Effective ownership at exit = (50,000 / 20,000,000) × (1 − 0.35) = 0.163%.

Exit value gross = $400M × 0.163% = $651,625. Net of strike ($40,000 to exercise) = $611,625.

Before taxes. See the option value calculator.

The distribution nobody shows you

~65% of venture-backed startups return zero to common stock (Cambridge Associates historical).
~25% return less than the strike cost or barely above.
~10% deliver a meaningful outcome.

The right way to think about the number above: it’s the value in the ~10% scenario. Multiply by 0.1 for expected value.

What makes it worth more

Grants early enough that dilution is small.
Companies that actually exit within your vesting horizon.
Products that reach a genuine outcome (not a $50M acqui-hire that returns preferred first).
Being at a company that grants refresh grants regularly.

What makes it worth less

Multiple down rounds with anti-dilution provisions that leave common holders behind.
Long paths to liquidity (private for 12+ years is now normal).
Preferred stock stack that eats the exit in a small M&A outcome.
Grants that vest post-acquisition into whatever the acquirer offers.

Common mistakes

Forgetting the strike cost.
Modeling gross exit value without preferred waterfall.
Trusting the recruiter’s “worth $X at IPO” number without checking dilution assumptions.
Ignoring taxes.
Not exercising vested options within the 90-day window post-departure (loses ISO status; often loses the shares entirely).

Option Value Calculator
Cap Table Dilution — see how each round diluted your grant
Seed Round Sizing — for founders sizing pool allocations

Try the calculator

Employee Stock Option Value Calculator

Interactive. Shareable via URL. No signup.

FAQ

Should I exercise early?+

Depends on strike, AMT exposure, personal cash, and belief in exit. Talk to a CPA who knows startup comp. Getting the LTCG clock running has real value.

What is a fair grant size for the first ten employees?+

In the US: employee #1-3 usually 1-2%; #4-10 usually 0.5-1%; each halves the next tier. Roles matter more than order.

Why does my grant get smaller each round?+

Because the pool refreshes at each round and the FMV goes up, so the same option pool covers fewer new shares in percentage terms.

Should I trust the 409A?+

It is a defensible number, not a market price. Recent secondary transactions are usually higher.

What about ISO vs NSO?+

ISOs have favorable tax treatment (capital gains if held) but can trigger AMT. NSOs are simpler and immediately ordinary income at exercise. Foreign employees usually get NSOs.