My thoughts on options are pretty much identical except I would say "worthless" no "worth less".
I would also add that with an option position you are most likely giving up a higher salary and the opportunity cost that comes with it.
An extra 30K each year invested at 5% in 5 years is worth more than 200K lump sum in 5 years (200K discounted at 5% for 5 years is $157K).
You also have to factor in the probability of an exit. I just multiply the probability by the expected future amount. So 10% chance of exit in 5 years with a predicted equity position of $1M I would only count it as $100K. Discount it for 5 years and it is even worse: $78K.
Of course you also have to factor in taxes. If you are already in a high bracket and in CA you are going to be paying 9.3 CA + 28 Fed + 6.2 FICA = 43.5%. So more salary is pretty much worth half as much. You might have to worry about AMT as well.
Of course with a capital gains, assuming you exercised more than a year ago (possibly earlier with ISO options) then you will be taxed at only 15%.
But you have also given up that cash and the associated opportunity cost. In effect, instead of a "free" lottery ticket taxed at 43.5% you now bought an expensive lottery ticket, for the option (hehe) of only being taxed at 15%.
I'm on my 3rd startup and have equity in all of them and have yet to see a single penny.
Honestly with tax brackets that high, and the chance of getting any equity so small, I'm more tempted to start a business on the side that can be taxed separately than try for a higher paying job.
The way I pick a company to work at now is more based on what kind of personal and career growth it will offer, and also how much I will like working there.