How Much is that 2% Worth?

Will that equity stake make you rich? This calculator can help you find out

Posted by Tejus Parikh on July 2, 2014

Startups need the best talent to succeed, but they need to acquire that talent without budget busting salary compensation. Startups can bridge the gap with a better culture, a more meaningful work experience, and the opportunity to grow faster than in a corporate environment. Soft and fuzzies go a long way towards wellbeing, but come up short when it's time to pay the bills. Equity compensation is often the answer. The ownership stake in the company will more than compensate for the decrease in salary if the company does well. Equity is also the murkiest piece of the compensation puzzle since it depends entirely on predicting the future. So how do you figure out exactly what that 2% stake is worth?

I wrote a simple calculator in angular.js to answer the question for myself. There are many excel macros out there that do a similar thing, but often they require specific versions of Excel or too many details. Also, at the end of the day I just care about my number.

What this calculator does is let you play around with multiple scenarios to figure out what that initial equity grant could be worth. It has support for preferences and participation, but really provides more of a back-of-the-napkin type calculations than exact transaction amounts. I've also added a section to enter an expected big company salary and a rate of return to see if or when you break even.

So if you're curious about what that 2% could be worth, go and play with it. If it looks like I got my math wrong or the calculator is too limited, the source code is hosted on github to be forked and modified to your heart's content.

Special thanks to my friend Christine Walker who tweaked the design. If you're looking for a good freelancer, you should definitely contact her.

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Tejus Parikh

Tejus is an software developer, now working at large companies. Find out when I write new posts on twitter, via RSS or subscribe to the newsletter: