Reviewing an offer from a private company

Why private-company options are $0 in a normalized figure

Every OfferMettle comparison treats private-company stock options as worth $0 in any normalized cash-equivalent number. That is not caution for its own sake — there is no defensible mark-to-market value for an illiquid minority stake in a company with no public share price. The 409A "fair market value" used for tax purposes is not the price a share would fetch on a sale: it is set below the last preferred round's price on purpose, because preferred stock carries a liquidation preference that common stock — including your options — does not. IRS, Internal Revenue Bulletin 2007-19 — final regulations under Section 409A, including the stock valuation rulesMay 7, 2007

Instead of a single dollar figure, a startup offer review — and the startup equity calculator that runs the same math in your browser — shows your options as a four-row exit-scenario grid: what they would be worth, net of exercise cost, at 0x, 1x, 3x and 10x the company's last preferred price. Nothing is invented — the grid uses only the strike price, share count and last preferred price you enter.

Four questions to ask before you sign

The exit-scenario grid only means something once these four numbers are known. None of them typically appear on the offer letter itself — they usually require asking.

• Strike price. The price per share you would pay to exercise. It sets the floor for the exercise cost in every row of the grid, and it is sunk in full if the company's shares are ever worth less than the strike price you paid. IRS Topic no. 427, Stock optionsApr 28, 2026
• Preferred stack. The set of preferred-stock financing rounds ahead of common stock in a sale or IPO payout. A high liquidation-preference multiple, participating preferred, or several stacked rounds can leave little or nothing for common holders even at what sounds like a respectable exit price. U.S. Securities and Exchange Commission — Office of Investor Education, private placement disclosuresJun 1, 2025
• Exercise window. How long you have to exercise vested options after leaving the company — commonly 90 days, though some companies extend it. Vested options not exercised inside that window are forfeited entirely, with nothing refunded. 26 U.S.C. §422(a)(2) — incentive stock options must be exercised within three months of leaving employment to keep ISO treatmentSep 17, 2026
• Total outstanding shares. Your option count divided by total fully-diluted outstanding shares is your ownership percentage. Without this figure, a grant of "10,000 options" is a number with no scale attached. National Venture Capital Association Model Legal Documents — capitalization disclosure practicesNov 1, 2025

A company that will not share the last preferred price or the outstanding-share count is itself a data point worth weighing — not because withholding it is improper, but because it leaves the ownership percentage and exit grid unknown rather than merely small.

Accept, negotiate, investigate, or decline

The same four paths apply to a startup offer as to any other — what changes is which column of the offer the decision turns on.

A worked example: reading one startup offer, step by step

Say a written offer reads: base salary $155,000; signing bonus $0; 25,000 stock options, strike price $1.20 per share, vesting 25% after one year then monthly over three more years; last preferred round priced at $6.00 per share; 8,000,000 total shares outstanding, fully diluted; 90-day post-termination exercise window; 401(k) with no employer match; standard at-will language.

1. Base salary is $155,000 a year, the one figure with no mechanics attached, before tax withholding.
2. Options: exercise cost. 25,000 options at a $1.20 strike price cost $30,000 to exercise in full — cash paid up front, before knowing whether the shares are ever worth more than that.
3. Options: exit grid. At 0x the last preferred price the options are worth $0 and the $30,000 exercise cost is sunk in full. At 1x ($6.00/share), gross value is $150,000 before the $30,000 exercise cost — $120,000 net, if the preferred stack does not reduce what common receives. At 3x and 10x, the same net-of-exercise-cost math scales up, still assuming nothing about the preferred stack's payout order.
4. Ownership percentage. 25,000 options against 8,000,000 total shares outstanding is roughly 0.31% fully diluted — a figure that only means something once you have both numbers, which is why the tool shows it as unknown rather than a guess when either is missing.
5. Exercise window. Leaving before four years means only the vested portion survives, and even that portion must be exercised — for $1.20 a share, in cash — within 90 days of departure or it is forfeited entirely.
6. Normalized cash-equivalent figure. In Panel A of a normalized comparison, this entire equity grant contributes $0 — the $155,000 base is the only number carried into a side-by-side comparison against a cash-heavy offer.

Read this way, the offer is one cash figure plus a four-row exit scenario and an ownership percentage — not one blended "total compensation" number. Compare this offer against a cash-heavy offer on the same three panels, using your own figures, or run just the equity grant through the startup equity calculator to see the exit grid and ownership percentage computed from your numbers.

Assumptions

This page and the worked example above hold the following fixed. Change any of them and the read changes with it.

Cash-equivalent value assigned to private-company options

$0 — no defensible mark-to-market value exists for an illiquid minority stake

Price used within each exit-grid row

Flat at each multiple of the last preferred price — never appreciated

Offer type

A written US offer from a private (not publicly traded) company, with at least 24 hours remaining before its deadline

Future dilution

Not assumed or forecast beyond the outstanding-share count you enter

Enforceability of any clause

Never determined here — state law and your specific facts control; this page names attorney-referral candidates only

When this answer changes

• You already hold a signed option agreement with the strike price and vesting schedule filled in — read the actual document; this page explains the mechanics it will contain, not a substitute for it.
• The company is publicly traded — its stock has a real market price, so the private-options $0 rule and exit grid on this page do not apply; a normalized cash-equivalent figure works instead.
• You have fewer than 24 hours remaining before the deadline — the eligibility screener will tell you whether the Sprint can still complete in time.
• The last preferred price or total outstanding-share count you were given turns out to be stale — a new financing round resets both, and the exit grid and ownership percentage change with them.
• A vesting, clawback or preferred-stack term looks unusual for the stage or sector — that is exactly the point an attorney referral applies, since this page explains mechanics rather than ruling on enforceability.