Behind the Scenes: EquityZen tackles "If I joined Uber After College"

Nat Disston
Jun 13th, 2014

With all of the hype around Uber and their newly announced $18.2 Billion valuation following the $1.2 Billion (both 'with a B') investment last week, I wanted to dig deeper than the headlines and analyze what this valuation would mean if I had joined Uber right out of college.

I am 24 years old and graduated in May 2012.

Where to Start:

We'll need to determine a few data points around the company's valuation at the time of my employment as well as my estimated equity compensation package.

To back-solve these figures we can look at public filings and make some assumptions about Uber's financials on the day I start, including:

1) Uber's valuation
2) Uber's share price
3) Uber's 409A valuation, or my exercise price [more on the 409A here]
4) Uber's shares outstanding

Also, I'll be using Uber's present day valuation (which, if you hadn't heard yet, is $18.2 Billion

My Equity Compensation Package:

In college, I studied finance and business. I likely got an entry level Operations or Business Development role (I am currently Business Development at EquityZen, so my estimates are accurate so far). Wealthfront has a great tool for salary and equity compensation ranges based on basic metrics like this. So, I'm an entry level Business Development guy at a company with over 100 employees in the Bay Area. Let's say I got 1 "basis point" or 0.01% in Equity compensation over the next 4 years. We can safely assume I am receiving  ISO's that will vest over 4 years with a 1 year cliff. 

To cross check the accuracy of my equity comp estimate, let's look at its total value. Thanks to VC Experts, we know that in November 2011, Uber raised $39 million at a $316 million post-money valuation. Investors paid $14.18 per share, implying that there were ($316,000,000 / $14.18 = 22,284,908) shares outstanding at the time. Therefore my .01% stake was "worth" .01% * $316M = $31,600 and I would have been issued .01% * 22.28M shares = 2,228 shares.

As for my strike price: VC Experts also reported that Uber's 409A share price as of 9/26/11 was $0.07/share.

My Net Worth...on Paper:

Now we have a good estimate on my equity package, so here's the fun part. 

Let's fast forward two years to today. A couple of things have happened since I was issued .01% of the company:

1) Uber raised $258M in August 2013 at a $3.5 Billion valuation (result: dilution)
2) Uber raised $1.2B in June 2014 at a ~$18 Billion valuation (result: dilution)
3) Uber conducted a 10:1 stock split (result: I own 10x as many shares as I used to, but so did everybody else)

How do I calculate my net worth? Remember I've only vested half of my shares thus far (as per the 4-year vesting schedule). To value those shares:

Initial grant: 2,228 shares
Vested shares: 0.5 * 2,228 = 1,114 shares
Stock split: 10:1 ---> 10 * 1,114 = 11,140 shares

I've vested just over 11,000 shares. And Uber raised $1.2 billion at $62.0522 per preferred share. Holy appreciation! I'm worth.... $691,000?!

What's more, if I were to continue working at Uber for another 2 years and vest the second half of my equity (another 11,140 shares) I would have what today is valued at $1,382,000. Look mah, I'm a millionaire!

Now What?

The cost to exercise my options is fairly nominal. My initial exercise price was $0.07 per share. Accounting for the 10:1 stock split that's $0.07 / 10 = $0.007. To exercise my options I will need to spend a whopping $0.007 * 11,140 = $77.98.

However, there are some less exciting realities around exercising my options including the Alternative Minimum Tax. This is a story for another time, but in short the AMT requires me to include in my taxes the financial gain of my exercised shares, which is calculated as the spread between my exercise price ($0.007) and the Fair Market Value ($62.05). That's a pretty big spread and something worth looking into for anyone receiving equity compensation, whether you're 'worth' $691K or not.

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