Hi everyone! I recently joined an early-stage startup that offered me 40,000 ISOs at a strike price of $0.25. They don't disclose the # of fully dilluted common stock because they say we'll use it to calculate % of ownership and it can be misleading as the company grows. Instead, they tell us what the preferred stock price was in their last round: $1.75
They say this information is good enough to estimate our gains shall the company grow and have a successful liquidity event because all preferred stocks are turned into common stock. Therefore the company says I can use the formula:
Return = (preferred_stock_price x multiplier - strike_price) x num_of_isos
Where the multiplier must be estimated by me based on how much I think the company will grow.
This formula is based on the notional value, as explained here: https://carta.com/blog/value-equity-offer-startup-equity-calculator/
Also, their incentive plan has 4 million shares approved (not necessarily issued). They said they were asked by VCs to make a plan for the first 100 employees, so they had to approve a lot more stock than was initially needed to be issued (we are 20 employees). Does this sound normal?
Is it reasonable to estimate that if the company sells next year at 10 times their current valuation (assume no further dillution), I would roughly make (1.75 x 10 - 0.25) x 40,000 = $690,000 ?
I know this is not actual financial advice, blabla.
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