The amount they raised is meaningless to an option holder, only the valuation. If the employee joined at the 1.5B valuation, they got nothing

In some cases, they probably have lost money if they early exercised at that valuation.

They wouldn't have exercised at that valuation. The options would be priced based on the 409a, which would be much much less than 1.5B.

Depends on when the 409a was performed and when the exercise happened. When the startup I work at got our Series A, a new 409a was done and increased the share price by roughly the same multiple of the new valuation, and now I have a wide spread for AMT should I exercise my options because of the new 409a.

So it's possible for employees to have joined after the new 409a when it was valued at 1.5bln and early exercised against that value.

And then they'd have sold at the higher value, because the sale price is almost certainly higher than whatever the 409a price was.

I have a hard time actually visualizing this math. Let’s say you join a 1.5B valued company and get offered $100k in stock options, but at $20k. So an 80% discount.Assuming the company meets the revenue goals maybe 10 years in the future but otherwise no other growth beyond the valuation, is it worthwhile for the employee to exercise the options, not early? Presumably they would have to turn around and pay another $20k in taxes the year that they exercised

Not nothing, just a fat haircut of ~40%, right?

Nothing is the best case (if they didn't exercise options). You're right: some lost money on the transaction if they did exercise, outside special consideration.

I don't think you can just say that bout the last raise.

Depends on the exercise price. Exercise price is lower than the preferred price that the investor paid. Due to the fact that investors get preferred shares.

409a can often be 20% of the preferred valuation.

Preferred vs common only matters when the company is sold at loss? The preferred shareholders get priority in terms of being made whole before the common shareholders.

In this case, since series C was 1.5bln and sold for $975m, then the preferred shares were bought during C would be made whole first (assuming the prior rounds were made whole first and there's enough left over for series C preferred) before those who exercised right after the valuation for common shares.

Edit: I forgot that preferred shares also come with liquidation preferences too, meaning that in a loss situation, later employees are highly unlikely to get something