How are startup options valued?

To determine the value per option, you need to first estimate the true market value per share. We take our current monthly revenue, multiply by 12 to annualize it, and then apply a 5x revenue multiple.

What does it mean to have options vested?

When a stock option vests, it means that it is actually available for you to exercise or buy. Unfortunately, you will not receive all of your options right when you join a company; rather, the options vest gradually, over a period of time known as the vesting period.

What happens to my options in an acquisition?

A few things can happen to your unvested options, depending on the negotiations: You may be issued a new grant with a new schedule for this amount or more in the new company’s shares. They could be converted to cash and paid out over time (like a bonus that vests). They could be canceled.

When does a company use a share repurchase option?

Updated July 14, 2020: A repurchase option is a term used when a company originally issues stock shares. It allows the company to repurchase the shares from the shareholders who own them at a later date. A repurchase option may be used for a number of reasons by a company.

What’s the difference between a stock repurchase option and vesting?

There are many differences between a standard repurchase right and vesting. With a repurchase right, a shareholder owns the stock that is subject to repurchase. When stock options are vested, the option holders do not have any rights to the stock.

When do founders get stock options in a private company?

In a private company setting, after the founders have been issued fully vested or restricted stock under their stock purchase agreements, the employees, consultants, advisors and directors who are subsequently hired commonly receive equity compensation through stock options.

What happens when a right to repurchase expires?

If parties with the right to repurchase option choose to repurchase, then the shareholder will keep their shares. There are many situations where both the investors and the company will allow the repurchase right to expire, especially if the company is doing well.