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> they actually have to buy their options

Yup. It honestly astounds me how many people don't factor this into their decision-making. Your only equity compensation on joining is the delta between your strike price and the current market value of your stock. This is often very little, far less than you give up in salary at many companies.

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Yep. This is a very important point. If you are experienced and planning on joining a startup try to negotiate for early exercise or a very long exercise window for your options. Either that or be prepared for a nasty bill if you ever decide to leave and the start up is doing well.

How does this tool help you work that out though.

I never said anything about this tool. Do that calculation yourself, if you're looking at thousands of dollars in compensation it makes sense to do the research and unerstand things fully.

This tool reflects that profit by assuming a current strike price based on average valuation changes between rounds. Instead of saying that you get the full value of the stock you buy, the calculation takes into account that you also have to purchase the stock.

This tool doesn't explain the dynamics going into the estimated profits (though it links to things that do), but it helps people avoid over-estimating the value by missing dynamics like strike price.

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