Show HN: Startup Equity Adventure Game

Welcome, Future Founder!

You are about to embark on the full journey of a startup -- from a napkin idea all the way to an IPO. Along the way you will learn how equity works, how funding rounds dilute ownership, how employee stock options are priced, and what it all means in real dollars.

Pick something fun -- this is your company for the next 9 stages.

This is you -- the lead founder. We'll track your equity throughout the journey.

What you will learn:

• ● How founding shares work
• ● SAFEs and convertible notes
• ● Option pools and 409A valuations
• ● Series A / B / C dilution
• ● Vesting cliffs and exercise windows
• ● IPO payouts and waterfall analysis
• ● The real math behind "I own 10%"

Note: Most US startups incorporate as a Delaware C-Corporation.

This game draws on concepts from An Introduction to Stock & Options by David Weekly. We recommend reading the full PDF after playing for a deeper dive into the mechanics.

For more on fundraising, check out these excellent resources from Y Combinator: Guide to Seed Fundraising, How to Plan an Early Stage Startup's Finances, Standard Deal Documents, and the YC Startup Library.

If you're building something people want, I wholeheartedly recommend applying to Y Combinator. It's the single best launchpad for early-stage startups -- the knowledge, network, and fundraising support are unmatched.

Created by Ilia Baranov with Claude.

Stage 1: Founding Shares

Every company starts by authorizing shares. Think of these as slices of the pie. The number itself is somewhat arbitrary -- 10 million is a common choice because it makes the math easy and leaves room for future grants. As a founder, you will issue yourself shares at essentially zero cost (the par value is usually $0.0001/share).

Adjust each founder's share of the equity. Percentages must total 100%.

83(b) Election — File Within 30 Days!

When founders receive shares subject to vesting, they must file an 83(b) election with the IRS within 30 days of receiving the shares. This is one of the most important tax decisions a founder will ever make.

**With 83(b):**You pay ordinary income tax on the shares' valueat grant. Since founder shares are issued at par value (~$0.0001/share), the tax bill is essentially $0. All future appreciation is taxed as long-term capital gains (max ~20% federal + state) when you eventually sell.**Without 83(b):**You pay ordinary income tax (up to ~37% federal + state) on each batch of sharesas they vest, at whatever the shares are worth at that point. If the company is worth $50M when your shares vest, you owe income tax on millions of dollars of "income" — even though you can't sell the shares yet.

Throughout this game, we assume the founder has filed an 83(b) election — meaning all future gains are taxed as capital gains, not ordinary income.

Coming Up: The Employee Option Pool

Before raising your first priced round, you will set aside a portion of shares as an employee option pool. This is how startups attract talent without paying top-dollar salaries — employees get the right to buy shares at today's price, betting that the company will be worth much more in the future. Typically 10-20% of shares are reserved for the pool, and it is carved out before investors price the round (diluting founders, not investors). We will set this up in a couple of stages.

Stage 2: SAFE Round

A SAFE (Simple Agreement for Future Equity) is the most common way early-stage startups raise their first outside capital. Unlike a priced round, a SAFE does not immediately create new shares or set a share price. Instead, the investor's money converts later when you do your first priced round. The standard template is the YC SAFE, a short, founder-friendly document used by thousands of startups.

Most SAFEs today are post-money SAFEs -- the valuation cap includes the SAFE money itself. This means if you raise $1M on a $10M cap, investors will own exactly 10%. This is simpler and more predictable than the older pre-money SAFEs, where your dilution depended on how much total capital was raised across all SAFEs.

In practice, startups almost always have multiple SAFE investors in this round -- angel investors, small funds, and accelerators each write their own SAFE note. Some VCs have ownership targets, meaning they want to own a certain minimum percentage to make the investment worthwhile. As you raise more, more investors tend to join the round.

The two key terms are the valuation cap and the discount rate. The investor gets whichever gives them more shares. (Note: most post-money SAFEs use only a cap with no discount -- try setting the discount to 0% for the modern standard.)

The Valuation Cap Trap

A higher cap feels like validation — but it's really a promise to deliver growth before your next priced round. Setting the cap too high creates serious risks:

**Down round risk:**If your Series A valuation comes in below the cap, it signals the company hasn't grown as expected. This triggers difficult investor conversations, depresses your negotiating position, and can scare off new investors entirely.**Compounding dilution:**With post-money SAFEs, each SAFE investor's ownership is fixed by the cap — but earlier SAFE holders aren't diluted by later ones. All the dilution from stacking multiple SAFEs falls on the founders.**Investor misalignment:**SAFE holders may pressure you to close your next round once a valuation hits their cap (locking in their deal), even if waiting could yield a better outcome for the company.**Hiring difficulty:**A high cap inflates the 409A valuation for employee options, meaning early employees get a worse deal with higher strike prices — making equity compensation less attractive.

Rule of thumb: set the cap at a valuation you're confident the company can exceed within 18 months.

Dilution Check

Stage 3: Option Pool & Employee Grants

Investors almost always require the company to create an option pool before their round closes. This pool is carved from the founders' share of the pie, not the investors'. A typical pool is 10-20% of the post-money shares. The 409A valuation determines the strike price for employee options.

As an employee joining a startup, you would receive options from this pool. Your options vest over time (typically 4 years with a 1-year cliff) and your strike price is locked in at your grant date.

This person will receive options from the pool. We'll track their equity alongside the founder's.

Your Team's Option Grants

Other early employees also receive grants from the pool (~80% of the remaining pool is allocated to the team). The individual grant percentages shown below are randomized for illustration purposes and are not indicative of what should actually be offered.

Stage 4: Series A

Series A is typically the first major institutional round. At this point your company has product-market fit signals and is ready to scale. A large VC fund will lead the round, often investing $5-15M at a valuation that reflects your traction. Every existing shareholder -- founders, SAFE investors, and the option pool -- gets diluted proportionally.

This is your first priced round -- and the moment your SAFE investors' money actually converts into real shares. Each SAFE holder gets shares at whichever price is better for them (cap or discount). The conversion happens right before the new Series A shares are issued, so the SAFE investors are already on the cap table when dilution from this round is calculated.

Option Pool Refresh

Investors typically require the company to top up the option pool before closing the round so there are enough shares to hire the next wave of employees. The new shares are created before the investor's shares are issued, which means the dilution from the refresh falls on existing shareholders (mainly founders), not on the new investors. This is one of the most founder-unfriendly mechanics