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What were your exercise prices at your last startup? What funding round/ipo?

What are the metrics behind exercise price + value of the startup (10M, 100M, 1B+ value)?

  • The exercise price gets established by a 409A valuation that represents the value of the common stock in a round. This is usually a substantial discount to the price investors paid for preferred stock. In my experience this has been 20-30% of the company valuation established at the closing of the round. It’s one time when you do whatever you can to get the valuation company to establish as low a valuation for you as is reasonable.

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  • This question is nonsensical. The price of a share/option is entirely a function of the number of shares – and that is entirely arbitrary. You can have 10000 shares valued at $100 or 100000 shares valued at $10.

    Equally the price after various stages is a function of the dilution – and is a straight mathematical formula.

    Clarify what you’re asking because it makes no sense to me.

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    • I concur.

      A startup worth 10M will have an exercise price at $10 if they have 1m shares and $1 if they have 10m shares. It’s simple math.

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      • Ugh. This is not true. Exercise price refers to a price that employees pay for their options. Investors don’t have an exercise price. They “exercised” upon purchase and thus have no option to buy. This their price is the price they paid. So yes, if you raised $10M and have 10M shares the investors purchase price is $1/share. But that is not what employees pay for shares. That’s because investors get preferred shares and employees get common. This works to your employees advantage and this price is established by a 409A valuation to satisfy the IRS (in the US).

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        • The exercise price is nonsensical without understand the valuation + share issue.

          Equally, the exercise price vs. the “market” price is what matters, otherwise all you do is incur tax liability.

          If the objective was to understand how much share “value” was given to employees – i.e. total value of options when exercised – then the above question is still irrelevant since it is the number of options granted which is the missing axis.

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