How can I have an idea of the dilution of employee stock options for a company that is going through different rounds of funding?
For example, a company that has received a total of $100M funding up until now gives stock options at the moment of signing a new employee, always for the same valuation amount. Let's suppose they give $1000 worth in stock options at the moment of signing over 3 years in batches of 6 months. Let's suppose that after a while, they go through another round of funding of another $50M and they sign new employees and give them the same $1000 worth of stock options, but now a different amount, given that the company has received more funding since last time around, and the pre-IPO valuation by the same company may have changed.
How can one calculate the ratio of dilution vs valuation between these two rounds in the stock options?
Here's a simpler way to think about it: you have an option pool, that is a small fraction of the total number of shares in the company. Say, 10%, which could be 100,000 shares. With those 100K shares, you need to offer options to your next 100+ employees. You do the math. As time progresses, employee number 500 is less critical than employee number 10. It's very common for employee #10 to get 10,000 stock-options, when employee #500, for the same skillset, will only get 1,000 shares (10 times less).
Think of your stock-options like a budget: you have some amount of stock, and you need to use it to pay future employees. Watch your allocation carefully.