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How to Calculate Employee Equity Using the % Shares Calculator
How to Calculate Employee Equity Using the % Shares Calculator

This guide explains how to convert between percentage ownership and number of shares or options when granting equity to employees.

Yin Wu avatar
Written by Yin Wu
Updated over 3 weeks ago

Understanding Percentage vs. Share Numbers

A company's shares outstanding can change over time, which affects stakeholder’s percentage ownership in the company. Therefore, offer letters must specify an exact number of shares or options to be granted and not a percentage of ownership. If you want to base equity grants on a percentage of the company's current capitalization, you'll need a mechanism to convert that percentage into a specific number of shares or options.

Using the Calculator

Pulley’s % Shares Calculator helps you convert between Target Ownership percentage and the actual number of shares or options to grant. The calculations differ depending on whether you're granting options or shares:

For Options: Target ownership % x Fully diluted shares = Options to grant

For Shares: Target ownership % x (Fully diluted shares + Shares to grant) = Shares to grant

Understanding Fully Diluted Shares

Fully diluted shares include:

  • The entire option pool (assuming full allocation)

  • All outstanding shares (both preferred and common stock)

Important: SAFE investments are not included in the fully diluted count until conversion occurs. This is because their eventual share count depends on future priced rounds, especially for SAFEs without valuation caps.

Why Options and Shares Calculate Differently

Options to be granted use a simpler calculation because they're granted from the existing option pool, which is already accounted for in the fully diluted share count. Share grants, however, create new shares that aren't yet accounted for in the total, so they must be added to the fully diluted share count first before multiplying by the Target Ownership %.

Getting Started

To use the calculator:

  1. Click the "% Shares Calculator" button from the left side navigation bar

  2. Enter the desired Target Ownership % and the company’s Price per Share

  3. The calculator will automatically show both options and shares to be granted to obtain the desired Target Ownership % in the company

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