Stock Option Exit Calculator
Find out how much your options would be worth at different selling points (and, importantly, after taxes) by using this calculator.
Exercise Timing Planner
How much more would you earn if you exercise and hold onto your shares for at least a year (and unlocking the long-term capital gains tax savings) versus waiting for the IPO to exercise? This calculator runs the numbers and tells you the additional net gain you could make under various selling scenarios.
While Secfi lets you tap into the value of your options through financing, you won’t get as much cash upfront as you would if you sold your options instead (even though in the latter case you would lose the upside).
The full truth is you don’t know when your company is going to IPO.
So if you finance instead of selling your options, you don’t know exactly when you’ll experience an exit. If you instead sell your shares on a secondary marekt, you get cash as soon as the deal is done (which is often a matter of weeks or months).
SharesPost merged with Forge Global in 2020 and now the combined company operates under the name Forge Global.
Forge/SharesPost acts as a marketplace for selling private company shares so startup employees can turn their equity into liquid assets (aka cash 💰).
It's an advanced platform that has the feel of a publicly traded marketplace.
Basically, you (as the seller) set the price and quantity you want to sell. A broker gets assigned to you, and they try to match you with a buyer. They don't always find one. In terms of time, the process can go quickly (especially for companies in popular demand) but can also sometimes take weeks or months.
As of 2020, Forge/SharesPost charged sellers a baseline fee of 5% for all transactions.
Startup employees that want cash now and don’t want to wait for an exit can sell their shares and gain liquidity.
This is especially ideal if the employee doesn’t feel confident in the future of their company and isn’t optimistic about the potential value of their shares.
The process of selling shares, looking for a buyer and closing the deal can be messy, so it doesn't hurt to have a well-designed environment to place your listing. Forge also offers helpful visualization tools and some information on recent price points.
When you sell your stocks through a secondary market, you get immediate cash but you’re letting go of your ticket to the IPO.
Fair warning – you may wake up with a major case of FOMO one day if your company has a successful exit.
Many companies don’t allow selling shares on secondary markets. For those that do, company approval is required to sell on a secondary market.
It’s not always in a company’s interest to let their pre-IPO shares be traded, so many of them refuse.
Many companies reserve the Right of First Refusal (ROFR). That means when you attempt to sell your shares, your company can step in and decide to buy the shares back themselves.
If that happens, you're still on the hook for the 5% fee to Forge/SharesPost.
Secondary markets tend to favor buyers, not sellers.
The buyers expect to make a profit on the deal, so you can expect to get somewhere in the range of 80% of your shares’ current value.
The money you make is taxed at the highest possible rates
When you make the transaction to sell your options, you're on the hook for the taxes for the money you just made. And unfortunately, your profit from selling your options will be taxed at ordinary income rates – the highest tax rate there is.
You won’t gain any tax benefits the way you could by exercising early, holding your shares for over a year, and then selling – in which case the money you make could be qualified as long-term capital gains and receive a more favorable tax treatment.
Forge/SharesPost requires a minimum selling amount of $100,000. Unfortunately, you can’t pool your shares with other shareholders to meet this minimum (like you can on EquityZen).
Founded in 2013, EquityZen is another secondary market similar to Forge/SharesPost.
It works basically the same way. You list your shares and a broker helps you find a buyer. As of 2020, EquityZen also charged a 5% fee on all transactions.
The biggest difference is that there’s a $175K minimum sale size (as opposed to $100K with Forge/Sharespost), but EquityZen allows sellers to pool their shares together.
Besides that, Forge/SharesPost offers a full-blown marketplace experience while EquityZen has a simpler messageboard-like look and feel.
EquityZen has the same advantages as Forge/SharesPost: if you want to cash out as much as possible on short notice, you can use their platform to find a buyer and sell your equity.
If the shares you want to sell aren’t worth enough to meet the minimum amount on either Forge/SharesPost ($100,000), EquityZen allows you to pool your shares with your colleagues to meet their required $175,000.
The disadvantages of EquityZen are similar to those of Forge/EquityZen:
Additionally, you'll need to pool up with coworkers if the shares you personally want to sell are worth less than $175,000.
It really comes down to whether financing versus selling on a secondary market is best for you.
Secfi was built for startup employees who want to exercise their options before an IPO occurs, who are looking to save money on taxes (and increase their profit), and/or who only have 90 days to exercise their options and need cash to make that happen.
Sharespost/Forge and EquityZen are better options for startup employees who want to be more liquid as soon as possible, or who aren’t optimistic about their company’s future / don't believe in a successful exit like an IPO.
If you've decided that selling is right for you rather than financing, choosing between the two platforms often comes down to which one you can actually find a buyer on. Their platforms have slight differences, but your best bet is simply to try both.