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What should you do with stock options during a recession?

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Re: What should you do with stock options during a recession?

#161

Post by xmprt »

bradlys wrote: post #115
justin_oaks wrote: post #87

Earlier quoted context omitted.

Any options a company offers me, I'll value at $0. That doesn't preclude my working for them if they have an otherwise compelling offer.

This is a bad take. If you truly value options at $0 then you’re often getting a garbage deal wherever you go. If you’re only negotiating over salary - you’re screwing yourself. Options is how you actually make money at startups. The salary is only enough to make sure you can afford to exercise your options regularly and not starve to death in an extremely HCOL area. If you value options at $0 - just join FAANG and n…

This is an even worse take. The only way startups are a good way to make money is by working at a VC. And that's only because they can buy into 10s or 100s of startups at once and only need one to succeed.

> If you value options at $0 - just join FAANG and never join a startup.

This assumes that people only care about money and not about job satisfaction, mission, team, more scope/control over the company's future, etc. There are many good reasons to join a startup. Making money isn't one of them.

Re: What should you do with stock options during a recession?

#163

Post by unicorn_eng »

I'm currently at a unicorn SaaS startup. I have 11,500 ISOs, about 7000 of which I've vested and exercised (I've got about 1.5 years left till I'm fully vested). My strike price is $1.50, which to me is a bargain, especially since there was a tender offer last year of around $14. There are ~70M outstanding shares.

Other stats: $60M ARR, 120% NRR last year, almost 100% YoY growth during 2021, raised $110M at 40x revenue last year, high NPS, company still has over $110M in the bank, TAM is in the tens of billions, current market penetration is Work environment is great, I have a great boss and a decently challenging/significant role. I'm a senior engineer making around $170k/year.

I'm curious what you all think - is it worth the risk of staying until I vest? The alternative would be to join a public software company and increase my salary significantly (which would help so much right now - we need a larger house for our kids).

Re: What should you do with stock options during a recession?

#164

Post by peyton »

rrdharan wrote: post #122
bergenty wrote: post #109

Earlier quoted context omitted.

Can someone explain to me why stock options are better than RSUs?

If you get ISOs (not NQSOs) and you early-exercise them such that the spread is $0 (or at least negligible/low) and you correctly file an 83b and the IPO or exit is more than two years from date-of-grant and one year from date-of-exercise, then you can get the more favorable long term capital gains tax treatment on the generated income from the exit event. That’s a lot of conditions, so IMO they don’t make all that m…

You talking about late-stage? Aren’t employee RSUs usually double-trigger? Not sure if good idea to take RSUs as early employee…

Re: What should you do with stock options during a recession?

#165

Post by TameAntelope »

subsubzero wrote: post #36

I gave my Wife money to exercise her ISO's(startup before IPO) for her first 1.75 years of shares when the company valuation hadn't changed. Her company went public and the stock jumped and then crashed, I think the current price per share is lower than her exercise price so she is underwater and the money I gave her is worth less as shares vs. cash I originally gave her. Really a huge bummer as this job up-ended our…

How do you give your wife money? Just seems odd.

Re: What should you do with stock options during a recession?

#166

Post by TameAntelope »

notch656a wrote: post #61
sumedh wrote: post #50

Earlier quoted context omitted.

> If you hold cash you're in a particular market, one that has earned significant returns measured against equities this year. What about the last 100 years?

Depends. Pennies from 1920? Beat inflation. $20 coin from 1924 ($20 was worth an ounce of gold, so it was just an ounce gold goin)? Beat inflation. Dollar bill from 1922? Lose, but mostly because the fed reneged on their obligation of gold backing. I believe If you held 100 years from 1805 to 1905 there wasn't much inflation at all. So it really depends.

Not during the last 100 years, for the last 100 years.

The whole point is you have no clue when the bear market will end, and a lot of the recovery happens in the first few days (or sometimes even just the one day) of the new bull market.

Trying to pull in or out means you miss out on the best gain days.

Re: What should you do with stock options during a recession?

#167

Post by ricardobeat »

jjeaff wrote: post #134
bradlys wrote: post #129

Earlier quoted context omitted.

If you think they're lottery tickets - pick a better startup. Seriously. You shouldn't be joining startups unless you think they have a chance of liquidation for you. If you really do think they're worthless THEN JOIN FAANG.

If you think your lottery tickets are worthless, then pick better lottery numbers!

Unfortunately I think most people will miss the sarcasm on this one.

Re: What should you do with stock options during a recession?

#168

Post by buck4roo »

psanford wrote: post #97
fortran77 wrote: post #63

Earlier quoted context omitted.

No. The worst outcome is you make no money AND you have to pay AMT on gains you never were able to realize.

You can claim the AMT credit in the future tax years.

Correct me if I'm wrong, but I recall this AMT overpayment credit could only be used up at rate of $3k/year and only in years where you also owed AMT?

Re: What should you do with stock options during a recession?

#169

Post by ricardobeat »

JumpCrisscross wrote: post #145
8note wrote: post #130

Earlier quoted context omitted.

Valued at $0 because thats what theyll be treated as when the founders and moneyed investors get paid out first. Sure, options are how you get rich from a startup, but you dont get rich at a startup by working for one, only by being a founder or an investor. That's why I work at a FAANG:P startups exist to screw their employees

> you dont get rich at a startup by working for one, only by being a founder or an investor I’ve written small (<$50k) Series A cheques into companies where employee no. 20 made more than I did. That’s fine. They invested a hell of a lot more and put much more on the line. Options shouldn’t be counted on. They’re high risk. But no need to be that cynical. Plenty of people want the ones they were in the trenches with…

I bet that employee didn’t have 50k in cash to invest in extremely high risk equity. Even people making 200k/year wouldn’t consider 50k a small amount (it’s almost half of your net). A higher-than-average salary is quite different from “getting rich”.

Re: What should you do with stock options during a recession?

#170

Post by brabel »

8note wrote: post #125
sunsunsunsun wrote: post #116

Earlier quoted context omitted.

That first article sure is funny. 10% to the first 10 employees... my current employer gave me roughly 0.001% in stock options and I'm employee #5.

That sounds like either they didn't need you or you made a poor choice? Or you were paid in cash instead?

Yeah, not OP that's my situation... they paid me way above market though :D so I am happy.
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