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Trying to model different IPO outcomes for your equity can get complicated fast, even if you love a good spreadsheet. You need to account for your share count, strike price, vesting schedule, exercise cost, and a variety of tax implications like the Alternative Minimum Tax (AMT). Missing a single assumption about dilution or lockup periods can lead to misleading results that impact how you should value the stock options in your job offer.
Secfi built Maeve, our free AI equity planning assistant, so you can get straight to the point with equity modeling. By combining specialized logic with real time data, we can help you understand your potential proceeds without the manual errors of a DIY build.
This article also covers the key inputs, scenarios, and risks you may want to consider when modeling different IPO outcomes for your equity.
The most efficient way to model outcomes is by using a specialized assistant designed for startup equity tax planning, such as Maeve. That way you can model and ask questions conversationally, while answers grounded in math instead of just generic predictions.
Maeve offers several potential advantages for modeling:
Works with your actual numbers including grant details and vesting schedules to provide specific answers rather than generic AI responses.
Pulls live market signals and private market price data (like 409A valuations) to give you a grounded sense of what your equity might actually be worth.
Models exercise and sell strategies over several years to help you optimize for future cash flow.
Uses Secfi's tax engine to help calculate the immediate tax impact of an exercise and model AMT exposure.
For illustrative purposes only. Actual results may vary and there is no guarantee of any particular outcome.
To build an accurate model, we believe you should start by organizing your data. We have found that precision at this stage prevents expensive surprises later when the lockup period expires.
You may want to gather the following information:
Number of options in your grant and the specific grant date.
Your strike price (the price you pay to purchase each share).
Your vesting schedule, including any cliffs or accelerated vesting terms.
The current Fair Market Value (FMV) or 409A valuation of the common stock.
Your tax filing status and estimated annual income.
Potential exit valuations based on recent funding rounds or public competitors.
It’s a lot to gather up, but having all that information is important.
"The long story short is that this is complicated. Even after doing this for years, if someone asks for their exact AMT liability, the reality is you need much more than just a few data points. If you really want to plan for an IPO properly, you have to look at a lot more of an individual's financial information." John Klingler, Equity Expert at Secfi
Many models assume your ownership percentage stays static, but the reality is more complex. Future fundraising rounds, increases to the employee option pool, and the issuance of new shares during the IPO itself can all reduce your percentage of the company. These equity events can affect your final proceeds, even if the total company valuation increases as expected.
The tax treatment of your options depends heavily on your timing. Incentive Stock Options (ISOs) may be eligible for long term capital gains if you meet specific holding periods, but exercising them can trigger AMT. Modeling after tax proceeds properly typically requires more than a basic calculator because the results depend on your specific tax situation.
Calculating these numbers often requires a deep dive, which is why trying to find an exact AMT number without a robust engine is difficult. Instead of a simple calculator with a few buttons, you need a tool that understands how different parallel tax systems interact based on your specific financial life.
You typically cannot sell your shares immediately after the opening bell. Standard lockup periods often last 180 days, during which the stock price can change significantly. If the price drops by 40% before your window opens, your initial IPO model will be inaccurate. Modeling outcomes across a range of post lockup prices can help you avoid the most common employee stock option mistakes.
Private companies usually lack the public transparency of the stock market. Because you often have to model outcomes with incomplete information, we believe it is important to compare multiple scenarios rather than relying on a single assumed exit value. It helps to look at preferred pricing and fund marks to build a more realistic estimate.
The following table summarizes how you might adjust your assumptions across different potential outcomes.
| Scenario | What you are testing | Assumptions to adjust |
|---|---|---|
Conservative IPO | What happens if the exit is smaller than expected. | Lower share price, more dilution, higher taxes, longer lockup, weak performance. |
Moderate IPO | What happens if the company meets expectations. | Expected share price, standard dilution, estimated tax impact, typical lockup. |
Optimistic IPO | What happens if the company performs better than expected. | Higher share price, strong post IPO growth, better sale timing, higher upside. |
For illustrative purposes only. Actual results may vary.
Secfi provides a comprehensive suite of tools, including Maeve, to help you model different startup exit scenarios with confidence. Our platform is designed to take the guesswork out of complex math so you can focus on the bigger picture.
When you work with Secfi, you gain access to:
A dedicated team of equity experts who understand the nuances of tech company exits.
Fiduciary financial planning through Secfi Wealth for holistic wealth management.
Non recourse financing options that can help you cover exercise costs and taxes without risking your personal assets.
Secondary market access if you want to sell your shares right away
Read more: How Secfi's equity financing and liquidity solutions work
Modeling your IPO is a high stakes task that we believe is difficult to do alone. Because your equity is likely one of your most valuable assets, the decisions you make regarding timing and taxes can have six figure implications.
Secfi's platform and team can help you navigate this complexity. Whether you are using Maeve for a quick scenario check or exploring liquidity solutions for startup executives, we are here to support your financial journey.
To calculate the potential value, you multiply your total number of vested shares by the potential public share price, then subtract the total strike price cost and estimated taxes. It is often helpful to use a tool that accounts for 409A valuations and potential dilution.
We recommend modeling at least three scenarios: a conservative outcome (low price, high dilution), a moderate outcome (expected price), and an optimistic outcome (high price, strong growth). This helps you understand your financial floor and ceiling.
Exercising early can start the clock for long term capital gains and potentially lower your tax bill if the FMV is low. However, it requires spending cash upfront and carries the risk that the company may not exit, so you may want to consult a professional or explore non recourse financing.
Taxes can eat up to 50% or more of your proceeds depending on your state and the type of options you hold. Incentive Stock Options may trigger AMT, while Non-Qualified Stock Options (NSOs) are taxed as ordinary income at the time of exercise.
Specialized platforms like Secfi offer specific calculators for AMT, exercise timing, and exit modeling. These tools are often more accurate than general spreadsheets because they are built specifically to handle the guide to employee stock option taxes.
The tool shown here uses artificial intelligence and is for illustrative purposes only and not necessarily indicative of future results and there is no guarantee that similar results can be achieved. The information provided by the tool is not professional advice and is not intended by Secfi, Inc., its affiliates, and Secfi representatives, to be deemed as investment, legal, tax or other professional advice or recommendations of any kind, or to form the basis of any decision to do or to refrain from doing anything. Secfi does not review the accuracy or completeness of the information provided to us within the tool.