Comments on: How to Set The Strike Price on Stock Options http://www.feld.com/wp/archives/2006/05/how-to-set-the-strike-price-on-stock-options.html Tue, 14 Feb 2012 01:23:00 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Brad Feld http://www.feld.com/wp/archives/2006/05/how-to-set-the-strike-price-on-stock-options.html/comment-page-1#comment-2960 Brad Feld Sat, 20 May 2006 19:26:49 +0000 http://www.feld.com/wp/?p=1040#comment-2960 We've seen ranges from $5k to $40k with most settling down in the $5k to $10k range. Any valuation with a clue can do a "good enough" job (as much of it is mechanical and repetitive) for under $10k. We’ve seen ranges from $5k to $40k with most settling down in the $5k to $10k range. Any valuation with a clue can do a “good enough” job (as much of it is mechanical and repetitive) for under $10k.

]]> By: Will http://www.feld.com/wp/archives/2006/05/how-to-set-the-strike-price-on-stock-options.html/comment-page-1#comment-2959 Will Sat, 20 May 2006 14:36:16 +0000 http://www.feld.com/wp/?p=1040#comment-2959 Oy! 409A. I can't wait until the IRS finds its poster child to set an example on this one so that everyone can focus. In the mean time, as you have said many times before, this topic is taking up too much corporate attention when execution is what should be the greatest concern. What is the range of cost that you're seeing in hiring the outside "expert"? A couple of companies I'm working with are getting prices all over the map. I can't believe this is a "you get what you pay for" type of thing . . . Oy! 409A. I can’t wait until the IRS finds its poster child to set an example on this one so that everyone can focus. In the mean time, as you have said many times before, this topic is taking up too much corporate attention when execution is what should be the greatest concern.

What is the range of cost that you’re seeing in hiring the outside “expert”? A couple of companies I’m working with are getting prices all over the map. I can’t believe this is a “you get what you pay for” type of thing . . .

]]> By: Dave Jilk http://www.feld.com/wp/archives/2006/05/how-to-set-the-strike-price-on-stock-options.html/comment-page-1#comment-2958 Dave Jilk Tue, 16 May 2006 22:22:55 +0000 http://www.feld.com/wp/?p=1040#comment-2958 In hindsight perhaps, that's not surprising at all. Since value in the common is preceded by a liquidation preference, immediately after a financing the common is worth the enterprise value - usually very low in an early stage company - and every dollar that is spent reduces the common value, not the preferred value. By the time you are about to raise another financing, hopefully you have increased the enterprise value but you have no cash, and the common is probably worth nothing if you were to liquidate it at that moment. In later stage companies where progress is slow, the value of the common should be effectively zero since the cumulative liquidation preferences are in excess of the enterprise value. In hindsight perhaps, that’s not surprising at all. Since value in the common is preceded by a liquidation preference, immediately after a financing the common is worth the enterprise value – usually very low in an early stage company – and every dollar that is spent reduces the common value, not the preferred value. By the time you are about to raise another financing, hopefully you have increased the enterprise value but you have no cash, and the common is probably worth nothing if you were to liquidate it at that moment. In later stage companies where progress is slow, the value of the common should be effectively zero since the cumulative liquidation preferences are in excess of the enterprise value.

]]>