If you work at a private unicorn — a company valued above $1B — your equity package is probably your largest potential financial asset. It's also probably your most misunderstood one. This guide is designed to fix that.
Step 1: Know what you own
Before you can value your equity, you need to know what type it is. The four main types:
- RSU (Restricted Stock Unit): You receive shares when they vest. No purchase required. Taxed as ordinary income at vest.
- ISO (Incentive Stock Option): You can buy shares at your strike price. May qualify for capital gains treatment if held long enough. AMT risk at exercise.
- NSO (Non-Qualified Stock Option): Same as ISO but taxed as ordinary income at exercise (no capital gains benefit).
- PPU (Profit Participation Unit): OpenAI-specific. Behaves like an RSU economically — no strike price, ordinary income at distribution.
Step 2: Know your valuation inputs
There are three prices relevant to your equity: (1) your grant price (or 409A at grant), (2) the current 409A, and (3) the current secondary market price. For valuation purposes, the secondary market price is the most current signal available — it reflects what an informed outside investor has recently indicated willingness to pay.
Step 3: Run the four-method valuation
PrivatePulse uses four independent valuation methods: Method A (peer-multiple), Method B (secondary-implied), Method C (primary time-decay), and Method D (sector momentum). No single method is always right — the four-way view gives you a defensible range.
Step 4: Model your liquidity path
The value on paper is only meaningful if you can access it. Map your company's likely path: tender offer in the next 12 months? IPO in 2–3 years? Strategic acquisition? Each path has a different probability and different tax treatment.
Step 5: Plan the tax consequences
Tax is the largest variable most employees don't model. For RSU holders: ordinary income tax on value at vest, whether or not you sell. For ISO holders: AMT at exercise, then capital gains if held. For NSO holders: ordinary income at exercise. Model your after-tax outcome, not just the pre-tax equity value.
Step 6: Monitor and update
Your equity value isn't static. New funding rounds, secondary market movements, competitor IPOs, and macro market conditions all change your valuation. Set a quarterly calendar reminder to update your PrivatePulse estimate.
The most common mistake: assuming the last funding round valuation is what your equity is worth. It's a 12-month-old data point. The secondary market gives you a live signal. Use both — they tell different parts of the story.