You Received Start-up Options.. Now What?

This week, we are discussing something every start-up employee and founder needs to understand.. equity compensation.

Because “10,000 stock options” sounds great… until you realize it could mean $10 or $1 million - and most employees have no idea which.

Let’s unpack what that number actually means.

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When you get a startup offer, you’ll usually see something like:

That tells you:

But what it doesn’t tell you:

So first: Ask for your fully diluted share count. That means all outstanding shares, including the option pool.

Then calculate:

Ownership % = Your Options ÷ Total Fully Diluted Shares

Example: If the company has 10,000,000 fully diluted shares and you have 10,000 options, then your ownership = 10,000 ÷ 10,000,000 = 0.1%.

Now that you know your % ownership, you can model potential outcomes.

Let’s say the company exits for $100 million.

Your Gross Value = Ownership % × Exit Value

So: 0.1% × $100,000,000 = $100,000

Now subtract your strike cost: 10,000 options × $1 strike price = $10,000

And remember, this is before dilution, taxes, and vesting. If you only vest half, your real value is closer to: ($100,000 – $10,000) ÷ 2 = $45,000

Still meaningful, but not life-changing.

Every time the company raises a new round, your slice shrinks.

Typical dilution looks like this:

So after two rounds, your 0.1% might look more like 0.07% or 0.05%.

That same $100M exit now yields closer to $50,000, minus strike and tax.

Let’s make this tangible with a simple example:

You own 0.1% of the company through your options. Here’s what that could look like at different exit values 👇

Base Case ($100M exit):

Strong Exit ($500M exit):

Unicorn Exit ($1B exit):

Mega Exit ($10B exit):

Most outcomes fall somewhere between the first two examples, and even then, those numbers shrink fast once you account for dilution, taxes, and partial vesting.

If you’re a founder issuing options, remember: equity isn’t free. It’s currency.

Two practical tips:

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Startup options can absolutely be life-changing. But they’re also misunderstood.

The next time you hear “10,000 options,” translate it into:

That’s how you find the real number that matters - net value after reality sets in.

The founders who attract and retain the best talent don’t just offer equity.. they explain it.

They help early employees understand what their options could actually be worth, how dilution works, and why ownership matters.

Because when employees understand their upside, they act like owners. And when they act like owners, the company wins.

If you haven’t shared an equity breakdown or scenario model with your team yet, it’s never too late to start.

Until next week,

Elana ✌️

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Disclaimer: The Cap Table DOES NOT provide financial advice. All content is for informational purposes only. The Cap Table is not a registered investment, legal, or tax advisor or a broker/dealer.