Startup Equity Calculator: What Your Offer Is Really Worth

By Kevin Luu, Co-Founder and Chief Learning Officer. Reviewed on 2026-09-30.

A startup equity calculator turns a stock option grant into a dollar range with one formula: your share count, times a realistic exit price per share, minus what you pay to exercise, minus tax, adjusted for future dilution and the odds the company never exits. The number on the offer letter (“0.25% of a $320M company”) is a paper value at the investors’ price, not cash. To compare it with the RSUs you would give up at Apple, Amazon, Genentech or Gilead, you need four inputs most offer letters leave out: fully diluted shares, the 409A strike price, the preference stack, and your tax picture in California or Washington.

This guide walks through that math for a high-income W-2 household weighing a startup offer, with a worked example at a $900,000 income.

The five numbers to ask the startup for

A calculator is only as good as its inputs. Before you model anything, ask the recruiter or hiring manager for these in writing:

1. Number of options (or shares) and the type. Incentive stock options (ISOs), nonqualified options (NSOs) or RSUs. Each is taxed differently.
2. Fully diluted shares outstanding. Your percentage is your shares divided by this number, including the option pool. A share count with no denominator tells you nothing.
3. Strike price and latest 409A value. The strike is usually set at the 409A fair market value of common stock on the grant date.
4. Latest preferred price and total liquidation preference. Investors buy preferred stock at a higher price and usually get their money back first in a sale. That “preference stack” sits ahead of your common shares.
5. Vesting, early exercise and the post-departure exercise window. These decide how much cash and tax risk you take on, and when.

Why the preferred price overstates what your shares are worth

The headline valuation is usually the preferred price times all fully diluted shares. Your common shares do not carry the investors’ preference, so in a modest sale they can receive far less than that headline implies, or nothing. The 409A value, which is lower, is closer to what common stock is worth today. A fair calculator shows both, and then models exits instead of trusting either one.

Worked example: a $900,000 California household weighs a Series B offer

Assumptions (illustrative): one spouse earns $500,000 at a public tech company ($250,000 base plus $250,000 a year in RSUs), the other earns $400,000. Two children, ages 4 and 7. The offer is a $260,000 base salary plus 160,000 ISOs at a $1.50 strike, four-year vesting with a one-year cliff. The startup reports 64,000,000 fully diluted shares and a latest preferred price of $5.00.

Step 1: ownership and paper value

• Ownership: 160,000 / 64,000,000 = 0.25%.
• Headline valuation: 64,000,000 x $5.00 = $320,000,000.
• Paper value at the preferred price: 160,000 x ($5.00 – $1.50) = $560,000, or $140,000 a year over four years.
• Cost to exercise everything: 160,000 x $1.50 = $240,000.

Against that, the family gives up about $250,000 a year of RSUs that turn into sellable stock at each vest, roughly $1,000,000 over four years before tax, plus whatever refreshers would have followed.

Step 2: dilution

Most startups raise again before an exit. If two more rounds each dilute existing holders by 20%, ownership falls to 0.25% x 0.8 x 0.8 = 0.16%. Assume those rounds bring the total liquidation preference to $250,000,000.

Step 3: exit scenarios

The probabilities below are assumptions for illustration, not a forecast. Change them to match what you know about the company.

Probability-weighted value: (20% x $1,360,000) + (5% x $4,560,000) = $272,000 + $228,000 = $500,000, received perhaps six to eight years from now, if ever. The RSUs being given up are worth about $1,000,000 over four years, subject to the public company’s share price. On these assumptions the offer pays less in expected value and carries far more risk. That can still be the right move for career or mission reasons, but the family should make it knowing the gap.

How the gain is taxed in California and Washington

Tax changes the answer more than most calculators admit. Using the $1B outcome, and to keep the math simple, every dollar of the gain is taxed at the top rate below. That slightly overstates the tax for a household whose other income does not already reach the top brackets.

California

• Qualifying ISO sale (stock held at least 2 years from grant and 1 year from exercise, per IRS Publication 525): top federal long-term capital gains rate for 2026 of 20% plus the 3.8% Net Investment Income Tax for 2026 (IRS) = 23.8%, or $323,680. California taxes capital gains as ordinary income with no lower rate (FTB), so at the 13.3% top rate (2025 schedule, the latest California has published, per the FTB rate schedules) that is about $180,880. Total about $504,560, leaving about $855,440.
• Disqualifying sale (for example, exercise and sell the same day at the acquisition): the spread is ordinary income. At the 37% top federal bracket for 2026 plus 13.3% in California, tax is about $684,080, leaving about $675,920.

Washington

For 2026 Washington has no tax on wages. Long-term gains are subject to Washington’s capital gains tax: 7% on taxable gains up to $1,000,000 and 9.9% above that, after a standard deduction that was $278,000 for 2025 (the 2026 amount is not yet published) (WA DOR). On a $1,360,000 qualifying gain, taxable gains are $1,360,000 – $278,000 = $1,082,000, so the tax is about ($1,000,000 x 7%) + ($82,000 x 9.9%) = $70,000 + $8,118 = $78,118, plus the same $323,680 federal. Washington has also enacted a 9.9% income tax on AGI over $1,000,000 starting January 1, 2028 (WA DOR), and how it will interact with the capital gains tax is still pending guidance. A sale in 2028 or later should be modeled again once that guidance is out.

The ISO rules that change your cash needs

• AMT at exercise. Exercising ISOs and holding the shares can trigger alternative minimum tax in the year of exercise (IRS Topic 427). For 2026 the married filing jointly AMT exemption is $140,200, and it phases out at 50 cents per dollar of AMT income above $1,000,000, disappearing completely at $1,280,400 (Rev. Proc. 2025-32). A $900,000 household that exercises with a large spread can lose much of that exemption, so run a projection before exercising.
• The $100,000 rule. ISOs that first become exercisable in one calendar year above $100,000 of stock, valued at grant-date fair market value, are treated as NSOs (IRC §422(d)). In the example, the grant is worth 160,000 x $1.50 = $240,000. With normal vesting, about $60,000 a year becomes exercisable, so all of it stays ISO. If the company allows early exercise of the full grant in year one, only $100,000 of it (66,666 shares) can be ISO and the rest is NSO.
• Early exercise and 83(b). If you early-exercise unvested shares, an 83(b) election must be filed with the IRS within 30 days of the transfer (Pub 525). RSUs are different: they are not eligible for 83(b) and are taxed as wages when shares are delivered.
• Leaving the company. To keep ISO treatment you generally must exercise within three months after your employment ends (IRC §422(a)(2); IRS Publication 525). If you leave after three years, your 120,000 vested options cost 120,000 x $1.50 = $180,000 to exercise, on stock you may not be able to sell. Ask whether the company offers an extended exercise window.

QSBS: a federal benefit California does not follow

If the startup is a qualifying C corporation and you hold the stock long enough, Section 1202 can exclude gain from federal tax. For stock acquired after July 4, 2025, the exclusion is 50% after 3 years, 75% after 4 years and 100% after 5 years, up to $15,000,000 per issuer, and the company’s gross assets must be $75,000,000 or less when the stock is issued (P.L. 119-21). The holding period generally runs from when you own the shares, so unexercised options do not count. California does not conform to these rules (FTB 540 booklet), so a California resident should assume the full gain is taxed by the state.

Common mistakes when valuing a startup offer

• Multiplying shares by the preferred price and calling it compensation.
• Ignoring the exercise cost and the AMT, which are paid in cash years before any sale.
• Comparing pre-tax startup value with after-tax RSU value, or the reverse.
• Forgetting that a public company’s RSUs can be sold at each vest, while startup shares may be locked up for years.
• Letting one grant become most of the family’s net worth with no plan for concentration.

For how RSUs are valued and taxed on the other side of the comparison, see how to calculate RSU value, and if the startup grants RSUs instead of options, read RSUs at private companies. For what happens to unvested and vested shares in an acquisition, see if a company sells, what happens to my stock.

What to write down for your kids

A job change that trades $1,000,000 of liquid RSUs for a lottery-shaped outcome is one of the biggest money decisions a family makes, and children usually see only the result. Write a one-page Decision Memo: the offer, the scenarios you ran, the odds you assumed, how much cash you set aside for exercise and AMT, and why you said yes or no. As Kevin Luu puts it: “Your kids don’t need to inherit your portfolio. They need to inherit your decision-making process.”

Next step

Before you sign, build the scenario table above with the startup’s real numbers and your own tax projection for the exercise year and the sale year. If you want a second set of eyes on the equity, the exercise plan and the California or Washington tax, our tax management and investment risk management teams at Age Five Family Office™ can model it with you through a Tax & Wealth Assessment.

This is general education, and the right move depends on the family’s full picture.

Written by

Kevin Luu

Co-Founder and Chief Learning Officer, Bright Advisers

Kevin has advised high-income W-2 tech and biotech families since 2015, and leads the education-first Age Five Family Office from Brea, California.

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