Stock options are complicated
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Stock options are complicated
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Re: Stock options are complicated
#2Regarding stock options expiring 3 months after leaving the company, it doesn't have to be this way and a lot of startups are moving in the direction of 10 year exercise periods.
I think Quora was the first to do this: https://dangelo.quora.com/10-Year-Exercise-Periods-Make-Sens...
Re: Stock options are complicated
#3Regarding stock options expiring 3 months after leaving the company, it doesn't have to be this way and a lot of startups are moving in the direction of 10 year exercise periods. I think Quora was the first to do this: https://dangelo.quora.com/10-Year-Exercise-Periods-Make-Sens...
Have any startups with 10 year exercise periods had a liquidity event yet? I'm genuinely interested to see how true to the idea they were, or whether they (eg) issued a bunch of new stock to current employees that diluted vested ex-employees.
Re: Stock options are complicated
#4Regarding stock options expiring 3 months after leaving the company, it doesn't have to be this way and a lot of startups are moving in the direction of 10 year exercise periods. I think Quora was the first to do this: https://dangelo.quora.com/10-Year-Exercise-Periods-Make-Sens...
I'm not sure about "a lot of startups", I'm personally only aware of a very few that are doing this. Word on the street that I hear is that maaaaybe your current employer might do this for employees they like, but not as a consistent policy. Many board members, founders, etc... feel they will take a retention hit if they were to implement something like this.
I personally think the status quo is insane, and I will never take another role with a options component of the package that does not have a policy like this.
Re: Stock options are complicated
#5Regarding stock options expiring 3 months after leaving the company, it doesn't have to be this way and a lot of startups are moving in the direction of 10 year exercise periods. I think Quora was the first to do this: https://dangelo.quora.com/10-Year-Exercise-Periods-Make-Sens...
I'm not sure about "a lot of startups", I'm personally only aware of a very few that are doing this. Word on the street that I hear is that maaaaybe your current employer might do this for employees they like, but not as a consistent policy. Many board members, founders, etc... feel they will take a retention hit if they were to implement something like this. I personally think the status quo is insane, and I will ne…
We do it. And I know of many startups that also followed Quora's example. Definitely not everybody does it, but also it's more than 0.
Re: Stock options are complicated
#6Regarding stock options expiring 3 months after leaving the company, it doesn't have to be this way and a lot of startups are moving in the direction of 10 year exercise periods. I think Quora was the first to do this: https://dangelo.quora.com/10-Year-Exercise-Periods-Make-Sens...
Have any startups with 10 year exercise periods had a liquidity event yet? I'm genuinely interested to see how true to the idea they were, or whether they (eg) issued a bunch of new stock to current employees that diluted vested ex-employees.
Some companies allow their employees to sell a portion of vested stocks whenever they're doing a new round. SpaceX is one of the top examples I know of. This is how they retain the top talent.
Re: Stock options are complicated
#7Regarding stock options expiring 3 months after leaving the company, it doesn't have to be this way and a lot of startups are moving in the direction of 10 year exercise periods. I think Quora was the first to do this: https://dangelo.quora.com/10-Year-Exercise-Periods-Make-Sens...
Zach Holman has a great article about it: https://zachholman.com/posts/fuck-your-90-day-exercise-windo...
And keeps an ongoing list of companies that offer extended exercise windows: https://github.com/holman/extended-exercise-windows
As somebody who has personally experienced every aspect of the stock option lifecycle (which fortunately worked out for me), I would never take a job at a company [1] if they didn't have an extended exercise window. The 90 day expiration period creates a massive gap between the risk/reward of equity for founders and the risk/reward of equity for employees, when the whole point of giving equity is to align those.
1: Assuming it was the type of company that compensated people with stock options
Re: Stock options are complicated
#8Earlier quoted context omitted.
I'm not sure about "a lot of startups", I'm personally only aware of a very few that are doing this. Word on the street that I hear is that maaaaybe your current employer might do this for employees they like, but not as a consistent policy. Many board members, founders, etc... feel they will take a retention hit if they were to implement something like this. I personally think the status quo is insane, and I will ne…
We do it. And I know of many startups that also followed Quora's example. Definitely not everybody does it, but also it's more than 0.
Good for you all (not sarcastic!) but as someone who did a job search recently, the number of startups that offer this is much much closer to 0% than 100%.
A late edit: and you will get pushback for even asking. Apparently we're all supposed to pretend that we're never going to leave the company / we owe them our undying loyalty. I've previously taken the honest route when asked why I was leaving a job and said the ceo didn't deliver on her promises (growth, revenue), so why would I stay? That approach does not necessarily work well =P
Re: Stock options are complicated
#9I can't help but feel the system is highly rigged in favour of investors.
Many countries have tax incentives for investors, but when it comes to people actually joining startups, investing their time and effort, then all you get is a tax bill - and mostly at a highly inconvenient time to pay it!
It very much feels like the system is designed to keep the rich rich, and to put the working (wo)man in their place.
Re: Stock options are complicated
#10Regarding stock options expiring 3 months after leaving the company, it doesn't have to be this way and a lot of startups are moving in the direction of 10 year exercise periods. I think Quora was the first to do this: https://dangelo.quora.com/10-Year-Exercise-Periods-Make-Sens...
> Regarding stock options expiring 3 months after leaving the company, it doesn't have to be this way and a lot of startups are moving in the direction of 10 year exercise periods.
This requires converting all options to NSOs, and the tax implications of NSOs are not pretty. (From a tax perspective, ISOs aren't great[0], but they're much better for employees, by design).
[0] You have to pay AMT on the spread between the option price and current value at the time you exercise, whether or not the equity is liquid, so you could end up paying a large tax bill only to find that the company goes bankrupt before you have the opportunity to ever sell your equity.