more-arw search

Q&A Forum

How to determine the value of stock options?

how to determine the value of stock optionsI'm in negotiations with a Series B startup whose valuation I do not know. What information should I ask for?



Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

First, their valuation should be fairly easy to find out. Ask for their decks!

Second, they are on their Series B and their valuation will only be important if they are not paying you market rate and the comp package includes options.

Third (and to answer directly your question), from a prospective employee point of view, the more important thing is their cash flow and how long their funds from the previous Series A will last (what if Series B does not turn out well) and how far is Series B going to take them.

Of course, all other decision factors re; start-up VS mature company applies.

David Belgum
Title: CFO
Company: Sureify
(CFO, Sureify) |

If you are receiving stock options, and you consider this an meaningful part of your compensation, I would ask what the fully diluted number of shares outstanding are. Good luck.

Topic Expert
Scott MacDonald
Title: President/Owner
Company: AlphaMac Resources, Inc.
(President/Owner, AlphaMac Resources, Inc.) |

The question isn't clear to me. Both Emerson and David have assumed you are in negotiations to go to work for a Series B startup. Is that correct?

Topic Expert
Peter Freeman
Title: Chairperson - Clean Tech Committee
Company: Keiretsu Forum - Angel Investors
(Chairperson - Clean Tech Committee, Keiretsu Forum - Angel Investors) |

The question is not, as Scott M observed, clear. However, in both the case of stock options to be received or investment in a series B, it is simply a matter of asking the company for valuation, which they should be willing to provide.

Stock option values should be at current FMV, which is determined by various methods I won't address. Typically the company knows it.

For a new investment, you should ask what they believe is their current or pre-money value. And it is negotiable (unlike stock options). The value can be determined via comparable transactions or using the Venture Capital method. Full disclosure, I prepared a course on ProFormative presenting the VC method:


Get Free Membership

By signing up, you will receive emails from Proformative regarding Proformative programs, events, community news and activity. You can withdraw your consent at any time. Contact Us.

Business Exchange

Browse the Business Exchange to find information, resources and peer reviews to help you select the right solution for your business.

Learn more

Contribute to Community

If you’re interested in learning more about contributing to your Proformative community, we have many ways for you to get involved. Please email [email protected] to learn more about becoming a speaker or contributing to the blogs/Q&A Forum.