How Much Are Your Stock Options Worth?

Your company's last round valued the business at $2 billion. You own 0.25% on a fully-diluted basis. So your equity is worth $5 million — right?

Almost certainly not. The math behind that $5 million number ignores the four prices your startup equity actually has, the cap stack sitting above your common stock, the strike price you still have to pay, and the taxes you would owe on exercise. The number that comes out of a "startup equity calculator" is paper value. Realizable value — what you could actually convert into cash — is usually meaningfully lower, and sometimes dramatically so.

This is not tax advice. Exercising stock options and selling private company shares both have tax consequences that vary by your equity type, holding period, and state. Consult a qualified CPA or tax attorney before making any transaction.

The Four Prices Your Equity Has

When someone asks "what are my shares worth," they usually want one number. But startup equity has at least four distinct prices, each calculated for a different purpose:

1. Strike price. What you pay to exercise an option. This was set on the day your options were granted, equal to the company's 409A fair market value at that time. If you joined early, your strike is low. If you joined recently, it's high.

2. Current 409A valuation. The company's most recent IRS-required appraisal of common stock, used to set the strike price for new grants. It's intentionally conservative because it has to be defensible in an IRS audit. The 409A is not a market price — it's a tax compliance number. For more on this, see our explainer on what a 409A valuation is and why it's not what your shares are worth.

3. Last-round implied price. The headline number you get when you take the company's most recent funding round valuation and divide by fully-diluted shares outstanding. This is the number most "startup equity calculators" use. It's also the most misleading, because it prices preferred stock — not common stock.

4. Secondary market price. What an actual buyer would pay for your specific share class today, in a real transaction, after accounting for liquidation preferences, illiquidity, the size of the preferred stack above you, and current secondary market conditions. This is the closest thing to what your shares are realizably worth.

These four numbers can differ by 5x or more. Strike might be $1.20. The 409A might be $4.10. The last-round implied might be $18.00. And the secondary market price for your common shares might be $7.50. All four are "the price of your stock," and all four are correct for their specific purpose — but only one of them tells you what someone would actually pay you in cash today.

Why the "Startup Equity Calculator" Answer Is Misleading

Most online equity calculators do the same simple math: (your ownership %) × (last-round valuation) = your equity value. It's a clean number, easy to share, and almost always wrong by a large margin. Five reasons that math breaks down:

It uses the preferred price, not the common price. A Series D at $5 billion is the price one investor paid for preferred stock — a different security than your common stock, with liquidation preferences, anti-dilution protection, and board rights you don't have. The Series D price doesn't translate to your shares. The last-round valuation myth breaks this down at length.

It ignores liquidation preferences. Before common shareholders get a dime in an exit, preferred shareholders get their money back — sometimes with multiples or participation. At many venture-backed companies, the preferred stack is large enough that common shareholders get materially less than their ownership percentage would suggest.

It ignores the option pool. Headline valuations are calculated on a fully-diluted basis that includes options not yet granted. As those options are granted to new hires, your percentage ownership shrinks — even if you don't sell a share.

It ignores strike price and taxes. Options aren't shares. To convert an option into a share, you pay the strike price. To sell either, you owe taxes on the gain. A vested option grant with $1M of "paper value" might net you $400K after exercise cost and taxes — or far less.

It ignores time and uncertainty. A calculator assumes the exit will happen, at the current valuation, with no further dilution. None of those things are guaranteed. Companies stay private longer, raise more capital, and exit at outcomes far from their last headline number. The honest version of your equity value is a range, not a number.

Paper Value vs. Realizable Value

The single most useful distinction in startup equity is between paper value and realizable value.

Paper value is what your equity looks like in a spreadsheet: ownership percentage × last headline valuation. It assumes the company exits at its current valuation, with no preferred stack, no taxes, no strike price, and no further dilution. It is the number you tell your in-laws at Thanksgiving.

Realizable value is what you could actually convert into cash today, accounting for: your share class and the cap stack above it, the strike price you owe to exercise, the taxes you owe on the gain, illiquidity, and what a real buyer would actually pay. It is the number that should drive your financial planning.

The gap between $960,000 and $312,000 isn't pessimism. It's arithmetic. Paper value treats every layer of friction as if it doesn't exist; realizable value puts them back where they belong.

How to Calculate the Value of Your Stock Options (the Honest Way)

If you want a defensible number instead of a calculator output, work through these steps in order:

Step 1: Confirm what you actually hold. Are these ISOs, NSOs, or RSUs? How many are vested? What's your strike price? When does your exercise window expire? Pull your grant agreement, your option ledger, and your most recent statement from Carta, Shareworks, or your equity admin system. Don't estimate — look it up.

Step 2: Find a credible per-share price for your specific share class. This is the hard part. Do not use the last-round headline divided by share count. Look for: recent secondary transactions in your company's shares (if you have access to them), your company's most recent 409A (a floor, not a ceiling), or a third-party price estimate that accounts for your share class and the cap stack.

Step 3: Calculate the gross spread. For options: (per-share price for your class) − (your strike price), multiplied by vested option shares. For RSUs at a private company, the per-share price is the gross value — there's no strike to subtract, but the shares typically only convert to cash on an exit or liquidity event.

Step 4: Subtract the cost to exercise. If your options are unexercised, you have to write a check for (strike × shares) to convert them. For NSOs you also owe ordinary income tax on the spread at exercise. For ISOs the spread can trigger Alternative Minimum Tax (AMT). For early-exercise scenarios, an 83(b) election may apply. How to exercise stock options at a startup walks through these mechanics in detail.

Step 5: Subtract estimated taxes. The exact number depends on your equity type, holding period, and state, but a useful planning anchor for federal + state combined is 35% to 45% on short-term ordinary income spreads, and 20% to 30% on long-term capital gains. QSBS (qualified small business stock) can change this materially. Talk to a CPA.

Step 6: Run the math at multiple exit scenarios. Don't anchor to one number. Calculate net proceeds at the current valuation, at half the current valuation, and at 2x. The spread between those three numbers is the honest range of what your equity might be worth. Anyone selling you a single point estimate is selling you precision that doesn't exist.

A Worked Example, End to End

To make the framework concrete, walk through a realistic scenario:

You joined a startup at Series A. You were granted 100,000 ISOs at a $0.40 strike. You've vested 75,000 over the past three years. The company has since raised a Series C at a $1.5 billion post-money valuation, implying roughly $9 per share fully-diluted. The current 409A is $4.20.

Paper math (the calculator answer): 75,000 × ($9 − $0.40) = $645,000.

Realizable math, layer by layer:

• Common stock at this company trades on secondary platforms at roughly a 25% discount to the implied preferred price. Common-stock implied price: $9 × 0.75 = $6.75.

• Apply a further 15% secondary market discount for illiquidity and the company's stage. Realistic secondary price for your common: $6.75 × 0.85 ≈ $5.74.

• Gross spread per vested option: $5.74 − $0.40 = $5.34. Total gross spread: 75,000 × $5.34 ≈ $400,500.

• Exercise cost (out-of-pocket): 75,000 × $0.40 = $30,000.

• Tax: assume a cashless exercise and immediate sale, blended federal + state ~38%. Tax on gross spread: $400,500 × 0.38 ≈ $152,200.

• Net realizable value today: $400,500 − $152,200 ≈ $248,300. Less than 40% of the paper number, and less than half the "calculator" answer.

Now do the same math at $0.75 billion (half the current valuation) and $3 billion (2x). The realizable value compresses faster on the downside than it expands on the upside, because the preferred stack absorbs more of the proceeds at lower exit values. That asymmetry is the single most important fact about common stock at a venture-backed company.

When to Trust Each Price

Each of the four prices is the right answer to a specific question. The mistake is using one of them to answer all of them.

Use your strike price to calculate the out-of-pocket cost of exercising. Nothing else.

Use the current 409A to understand the strike price on any new options the company grants you, and as a conservative floor on what your common stock could be worth.

Use the last-round implied price to understand how investors are pricing the company's preferred stock, and as a useful (but inflated) ceiling for your own common stock. Never plug it into a personal financial plan directly.

Use the secondary market price for your share class for everything else: net-worth tracking, decision-making about exercising, deciding whether to sell, and modeling realistic exit scenarios. If you don't have access to a secondary market price, get one — that's the gap a free price estimate is designed to close.

What This Means in Practice

If you take one thing from this article, take this: the number on the calculator and the number in your bank account after a sale are different numbers, and the gap between them is not small. It's not a rounding error. It's the entire difference between paper wealth and real wealth.

That doesn't mean your equity is worthless. It means the honest version of "what are my shares worth" is a range that depends on your share class, the cap stack above you, your strike price, your tax situation, and current secondary market conditions. A single number — especially one pulled from a calculator that only knows the last-round headline — is not just imprecise. It's the wrong shape of answer.

The shareholders who make the best decisions about exercise, holding, and selling are the ones who treat their equity as a range to be modeled, not a number to be quoted. Strike price tells you the cost. The 409A tells you the floor. The last-round implied tells you the ceiling. The secondary market price tells you where reality lives. Knowing which is which is most of the work.

Earlyasset, Inc. does not provide investment advice and is not a registered investment adviser. Pricing estimates are algorithmic and do not constitute an offer to buy or sell securities. All transactions respect the company's right of first refusal (ROFR) and any transfer restrictions in your equity agreements. Direct liquidity is provided by Earlyasset Capital, LLC, a separate entity from Earlyasset, Inc.

Tax disclaimer: This article is general educational content only and does not constitute tax, legal, or financial advice. Tax treatment of stock option exercises and secondary transactions varies significantly based on equity type, holding period, state of residence, individual circumstances, and other factors. Consult a qualified CPA, tax attorney, or financial advisor before making any transaction decision. Earlyasset, Inc. is not a tax advisor and does not provide tax guidance.