Just how much is that 2% really worth?

Re:Just how much is that 2% really worth? by mrb on Thursday July 03, 2014 @01:32PM (#7984478)

There is a blatant bug in the computation. Do not trust the site!

Enter $100k as the startup salary, and zero equity (0 shares, $0 strike price, no funding round, any sale price for the liquidity event happening after 12 months).

Enter $150k as the big co salary, and the default 5.75% rate of return.

The result should be Total Big Co Earnings = $152,875 ($2,875 is the interest gained on the $50k salary diff for 12 months), but instead it shows $196,947!

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Re:Just how much is that 2% really worth? by zeeboo on Thursday July 03, 2014 @01:43PM (#7984528)

It appears to apply the interest rate monthly. I'd love to have a 5.75% interest every month.

Here's the calculation. It's a little high because we should be getting 1/12th of the 50k per month and compounding, but I'm assuming we got the full 50k up front and got a 5.75% interest compounded per month.

    50000*(1.0575 ^ 12)
    97799.02314394798212000000

edit: I take it all back. It's super broken. Just mess around with the interest rate and nothing makes any sense. For example, a 0% return still gives you $195,833.33 big co earnings on a 150k salary!

edit 2: The bug is in this function and the one below it: https://github.com/vijedi/equity_calculator/blob/master/js/a...

If your interest rate is zero, the calculated interest is 11 * the monthly difference. Then it's added to your base big company salary, which is clearly wrong. It should be 12 * the monthly difference added to the startup salary.

edit 3: Opened a pull request with what I think is the fix: https://github.com/vijedi/equity_calculator/pull/4

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Re:Just how much is that 2% really worth? by vi_jedi on Thursday July 03, 2014 @04:08PM (#7985428)

I'm the guy that wrote this. Thanks for playing with it and fixing the issue. I guess writing interest calculation functions late at night is a really bad idea.

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Re:Just how much is that 2% really worth? by benmanns on Thursday July 03, 2014 @01:46PM (#7984548)

I think the 5.75% return is over the 48 month vesting duration, on the extra money you would have earned (and invested). So, the excess (per year) would be something more like (50(1.0575^3)+50(1.0575^2)+50*(1.0575^1))/4. (Though it seems I'm a little off, so maybe they do the calculation monthly or biweekly).

Edit: Search http://www.tejusparikh.com/projects/equity_calculator/js/app... for bigCoInterest.

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