Disclaimer: The numbers are made up, but reflect the real proportions.
I was offered a job at a startup, which just closed a financing round with $10M valuation and has 10M outstanding shares. The offer included 25k options vesting over 4 years (25% vest per year, 1-year cliff). The strike price is $0.1.
According to the startup equity calculator and taking the current $10M valuation as expected exit value, these options should be worth $24k in total.
However, my potential future boss has told me that the offer is the equivalent of $10k per year flowing into stock options and are thus worth $40k in total. His calculation was as follows: The next 2 years, the valuation is $10M and and a fictive $20k flow into stock options, making up 20k of options. In 2 years, there will be the next financing round at about $40k valuation. Then another $20k flow into stock options, adding another 5k of options. Thus over 4 years, a total of fictive $10k per year have flown into options, thus this salary component has a value of $10k per year.
My question is now: Which of the two calculation options reflects the value of the stock options better? Is it common/good practice to evaluate the stock option offer not based on the current valuation but some future valuations in a next financing round?
My question differs from the following one because I am offering 2 potential evaluation methods: What are the questions to ask a pre-seed start-up in order to understand the value of the offered equity?.