This file complements a blog post I wrote, which you can find here:

If you find an error, please let me know, so I can correct it for everyone - Thanks

Personal Assumptions
Percentage ownership of your seed-funded company:
Your effective income tax rate:
Number of years to an IPO:
Number of years to an M&A exit:
Your cost of capital:
Dollars invested by the seed investor:
Seed investor's ownership of the company:
Percentage chance your company has an average disclosed M&A exit:
Percentage chance your company has an average IPO exit:

Expected present value of your options at M&A exit:

Expected present value of your options at IPO exit:
Total expected present value of your options:
Increase in your salary over four years that would make you indifferent to options:

Backup Data and Work:

Money Tree

Seed
Early Stage
Expansion
Later Stage
Grand Total
Seed
Early Stage
Expansion
Later Stage
Average Investment at Seed
Valuation Assumed 30% Ownership VC

Average Investment at Early Stage

Valuation Assumed 30% Ownership VC
Average Investment at Expansion
Valuation Assumed 30% Ownership VC
Average Investment at Late Stage
Valuation Assumed 30% Ownership VC

IPOs
Number
Mean Age of IPO
% as number of seed funded of 7 Previous Years
Valuations
Average
Average 6-month Return on VC-backed investment 2007-2011
Estimated 3-year Valueation
Expected Value
M&A
All Deals
Deals with Disclosed Price
Disclosed M&A Value
% as number of seed funded of 4 Previous Years - Used Announced Deals to be consistent
Value/Deal * Probably not representative of the deals without disclosed price, but used this
Expected Value

The Average Option Grant

Options
Seed Capital Invested (average 2001-2012)
Ownership After Investment - Valuation
Strike Price
Early Stage Capital Invested (average 2001-2012)
Expansion Stage Capital Invested (average 2001-2012)
Late Stage Capital Invested (average 2001-2012)
M&A Assumptions
- Only 1 extra round of funding. Both investors get 1x Liquidation Pref and participate. No dilution protection
- Employee does not receive a second option grant

Years after Seed Funding to Exit

Average M&A Exit 2008-2012
Assume Seed VC Receives 1x Liquidation Pref
Assume Early Stage VC Receives 1x Liquidation Pref
Assume Expansion Stage VC Receives 1x Liquidation Pref
Ownership of Early Stage VC
Options Ownership after Second Round - First VC has no dilution protection
Ownership of Expansion Stage VC
Options Ownership after Round 3
Value of M&A after Liquidation Pref
Option Valuation
Subtract Strike Price
Effective Income Tax Rate
Payout from Option Grant Assume Full Vesting
Average % of Seed Startups With Represented Acquisition Price after 4 Years (2008-2012)
Expected Payout Based on % of Seed Startups Acquired after 4 Years
Present Value Factor
Present Value of Expected Payout

Present Value of Total Expected Value of Options

Year
Salary Increase Required to Forgo Options
Present Value Term
Total Present Value
Difference

Blog Post
Your Assumptions
(Leave Blank if You'd
Like to Use Defaults
and Averages)
1
2
3
4

Research Sites
https://www.pwcmoneytree.com/MTPublic/ns/index.jsp
https://docs.google.com/file/d/0B6lJl7UfVCAeaFB6Zlk1OEFjbmM/e
http://www.marketwire.com/press-release/venture-backed-ipo-exi
http://www.nvca.org/index.php?option=com_content&view=article

Payouts
10,082
11,831
21,914
7,676

https://www.pwcmoneytree.com/MTPublic/ns/index.jsp
2000
704
2,851
3,700
782

30%

2001
279
1,296
2,391
621
4,587

2002
181
876
1,581
564
3,202

3,157,737,600
25,286,050,100
59,081,156,900
17,600,475,800

800,727,500
8,578,639,800
############
8,667,612,500

340,159,400
3,969,646,500
############
5,730,939,100

4,485,423
14,951,409

2,869,991
9,566,637

1,879,334
6,264,446

25%
20%
15%

2008
7
7
0.3%
3,645
521
10.5%
575.39
1.92
16236.9
422
134
16,237
9%
121
11.45

8,869,186
35,476,745.14
15,967,880
79,839,401
22,507,002
150,046,682

2009
13
7
0.6%
9,192
707
781.32
4.32
281.890625
360
109
12,365
6%
113
7.20

6,619,321
26,477,283
9,580,804
47,904,020
13,957,508
93,050,054

2010
70
6
2.8%
111,386
1,591
1,758.31
48.42
415.890625
544
149
17,700
8%
119
9.68

4,531,560
18,126,240
7,668,779
38,343,895
10,161,240
67,741,597

2011
51
7
1.9%
94,987
1,862
2,058.05
38.36

498
169
24,093
9%
143
13.07

0.5%
3,195,669
10,652,229.70
53,261
5,000,251
8,363,200
9,854,671

d participate. No dilution protection

IPO Assumptions
- 3 extra rounds of funding. All Investors get 1x liq
- Employee does not receive a second option gran

4
133,561,492
3,195,669
5,000,251
8,363,200
25%
0.38%
20%
0.30%

Years after Seed Funding to IPO

Holding Period (years)
Average IPO Valuation 3 Years Out
Assume Seed VC Receives 1x Liquidation Pref
Assume Early Stage VC Receives 1x Liquidation Pre
Assume Expansion Stage VC Receives 1x Liquidatio
Assume Late Stage VC Receives 1x Liquidation Pre
Ownership of Early Stage VC
Options Ownership after Round 2
Ownership of Expansion Stage VC
Options Ownership after Round 3
Owneship of Late Stage VC
Options Ownership after Round 4

117,002,372
351,007
297,746
40%
178,648
10%
17,634.02
15%
10,082.31

Value of IPO after Liquidation Pref

Option Valuation
Subtract Strike Price
Effective Income Tax Rate
Payout from Option Grant Assume Full Vest
Average % of Seed Startups IPO'd after 7 Years (20
Expected Payout Based on % of Seed Startups IPO
Present Value Factor
Present Value of Expected Payout

21,914
1
7,676
87%
21,914
-

2
7,676
76%

3
7,676
66%

4
7,676
57%

ytree.com/MTPublic/ns/index.jsp
m/file/d/0B6lJl7UfVCAeaFB6Zlk1OEFjbmM/edit?usp=drive_web
e.com/press-release/venture-backed-ipo-exit-activity-more-than-doubles-q22013-with-strongest-quarter-biotech-1807323.ht
ndex.php?option=com_content&view=article&id=257&Itemid=103

2003
216
799
1,355
653
3,023

2004
234
903
1,201
884
3,222

2005
263
857
1,115
1,061
3,296

365,730,500
3,608,527,500
9,802,553,800
5,907,312,200

951,624,700
4,045,870,200
9,045,158,900
9,194,457,000

997,050,500
4,047,486,100
8,607,941,500
9,942,011,700

1,693,197
5,643,989

4,066,772
13,555,907

3,791,067
12,636,888

4,516,305
18,065,219
7,234,357
36,171,785
9,046,420
60,309,466

2012
49
8
1.7%
122,264
2,495

4,480,476
17,921,906
7,531,356
37,656,781
10,400,969
69,339,796

4,722,854
18,891,417
7,720,127
38,600,635
9,370,416
62,469,442

Data from NVCA

NVCA Yearbook 2013
NVCA Yearbook 2013
1.4%
NVCA Yearbook 2013

https://docs.google.com/file/d/0B6lJl7UfVCAeaFB6Zlk1OEFjbm
2,757.18
45.83

479 http://www.marketwire.com/press-release/venture-backed-ip
128 http://www.marketwire.com/press-release/venture-backed-ip
21,996 http://www.marketwire.com/press-release/venture-backed-ip
16%
10%
172
134
27.92

tra rounds of funding. All Investors get 1x liquidation Pref. Participate after Liq Pref No dilution protection
loyee does not receive a second option grant

after Seed Funding to IPO

ng Period (years)
ge IPO Valuation 3 Years Out
me Seed VC Receives 1x Liquidation Pref
me Early Stage VC Receives 1x Liquidation Pref
me Expansion Stage VC Receives 1x Liquidation Pref
me Late Stage VC Receives 1x Liquidation Pref
rship of Early Stage VC
ns Ownership after Round 2
rship of Expansion Stage VC
ns Ownership after Round 3
ship of Late Stage VC
ns Ownership after Round 4
of IPO after Liquidation Pref

act Strike Price

ive Income Tax Rate
ut from Option Grant Assume Full Vest
ge % of Seed Startups IPO'd after 7 Years (2008-2012)
ted Payout Based on % of Seed Startups IPO'd after 7 Years
nt Value Factor
nt Value of Expected Payout

7
0.5
1,586,049,297
3,195,669
5,000,251
8,363,200
9,854,671
25%
0.38%
20%
0.30%
15%
0.26%
1,559,635,505
3,977,071
3,923,809
40%
2,354,286
1.4%
33,749.30
15%
11,831.26

gest-quarter-biotech-1807323.htm

2006
395
1,000
1,382
1,109
3,886

2007
526
1,130
1,276
1,285
4,217

2008
534
1,139
1,244
1,251
4,168

2009
374
973
888
903
3,138

2010
410
1,272
1,074
869
3,625

1,283,187,900
4,718,849,300
11,162,688,300
10,412,594,300

1,831,252,900
6,078,012,600
11,081,616,700
12,895,792,000

1,909,283,300
5,738,010,500
10,872,070,500
11,434,644,500

1,734,190,800
4,906,563,200
6,814,111,600
6,776,560,000

1,667,778,700
5,867,002,500
8,697,647,500
7,078,901,300

3,248,577
10,828,590

3,481,469
11,604,898

3,575,437
11,918,123

4,636,874
15,456,246

4,067,753
13,559,176

4,718,849
18,875,397
8,077,198
40,385,992
9,389,174
62,594,495

5,378,772
21,515,089
8,684,653
43,423,263
10,035,636
66,904,239

5,037,762
20,151,047
8,739,607
43,698,033
9,140,403
60,936,022

5,042,717
20,170,866
7,673,549
38,367,745
7,504,496
50,029,974

4,612,423
18,449,693
8,098,368
40,491,841
8,146,031
54,306,876

d/0B6lJl7UfVCAeaFB6Zlk1OEFjbmM/edit?usp=drive_web

/press-release/venture-backed-ipo-exit-activity-more-than-doubles-q22013-with-strongest-quarter-biotech-1807323.htm
/press-release/venture-backed-ipo-exit-activity-more-than-doubles-q22013-with-strongest-quarter-biotech-1807323.htm
/press-release/venture-backed-ipo-exit-activity-more-than-doubles-q22013-with-strongest-quarter-biotech-1807323.htm

ion protection

2011
446
1,576
1,020
922
3,964

2012
283
1,682
967
838
3,770

1,074,662,600
8,801,655,500
9,823,627,200
9,851,503,000

743,723,800
8,001,557,800
9,397,882,300
8,730,980,500

2,409,557
8,031,858

2,627,999
8,759,998

5,584,807
22,339,227
9,631,007
48,155,035
10,684,927
71,232,849

r-biotech-1807323.htm
r-biotech-1807323.htm
r-biotech-1807323.htm

4,757,169
19,028,675
9,718,596
48,592,980
10,418,831
69,458,874