Startup Option Vesting & Dilution Modeler: Calculate Equity Valuations and Options Schedules
In this guide:
Understanding Employee Stock Option Vesting
Vesting is the process by which an employee, advisor, or founder earns the right to own stock options or shares over time. In high-growth startups, equity grants are almost always subject to a vesting schedule to incentivize long-term commitment and align interests between employees and shareholders.
The Standard 4-Year Vest and 1-Year Cliff
This calculator supports the venture capital standard vesting structure:
- Vesting Duration: Typically 4 years (48 months), meaning you earn 1/48th of your grant each month.
- 1-Year Cliff: A standard safeguard. Under a cliff, no shares vest during your first 12 months. On the 1-year anniversary, 25% of your grant vests instantly, followed by standard monthly vesting.
How Ownership Percentage and Valuation Are Computed
Your ownership percentage is calculated by dividing your granted options by the total outstanding shares of the company. The implied value of your equity is then projected using the company's latest post-money valuation. As the company raises subsequent rounds or increases in valuation, the implied value of your options grows proportionally.
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