Think about how surreal that is.
90 days to exercise startup options is unfair, ridiculous and should be stoppedFeb 9
VCs and founders should be ashamed of the policies that force employees to buy options within 90 days or get nothing upon exit or termination.
- Cisco / Otherendofdays9A company I worked for had a VC propose that we revise the employee stock agreement claw back exercised vested from any employee who departs shares because “we are all in this together and anyone who leaves doesn’t deserve to profit from the work of others.”
Think about how surreal that is.
- What is the alternative? Do you think you should just forever have the option? Then no one would ever invest...
- That is the thing, if your a unicorn, it is ok. If you have three pivots, it's a nightmare. Options should be used for retention, once your gone, you should make a decision. By the way, you can negotiate this piece, but except for a very rare exception, I see no reason why the company would do it
- Many companies are now doing it: Pinterest, Quora, asana, amplitude, coinbase to name a few. It’s the misapprehension that options are just a retention tool that has workers calling bs. If you are early stage senior level employee directly building and impacting the business then you have earned your equity
- Bloomberg iVX372It's untrue that no one would ever invest with a 10-year share exercise window. Vested options should be unavailable to investors, period. If the founders didn't have their shit together and pivoted too many times, and gave up too much stock, that's their own damn problem. They can sell some of their disproportionate share in the equity, which is all the more disproportionate due to not having their shit together.
Investors will invest in whatever fraction of equity remains if there is still value in the company. Whether or not there is business value in the company is the primary responsibility of the founders. Failing to create it should penalize them over any early senior employee who flawlessly executes the the founders' flawed business plan.
A 90-day share exercise window is pure exploitation. There's no other fair way to describe it.Feb 93
- Compass / EngFUPayMemore100% agree. They could extend it up to 10 years and would still be in compliance with the law. 90 days is a choice.
- Tax law says ISO options must be exercised within 90 days of termination but some companies such as Pinterest convert ISO to NSO after 90 days post termination and you can exercise the vested options for up to 7 years after that. But taxes are due on the spread as ordinary income at exercise time with NSOs.
- @manorama ISO tax law is complex. The spread is considered income for AMT purposes only at exercise, not considered ordinary income or capital gains. When you sell you owe the spread between strike price and sale price as cap gains (there are rules re. whether it’s LT or ST). You get double taxed potentially due to the AMT but you can claim AMT paid due to ISOs as a credit in future years where you don’t owe more AMT than ordinary gains. tl;dr: too complex to explain on Blind. Look up ISO AMT credit and read some articles about AMTFeb 100
- Thanks 🙏🏼 got the gist of it . You basically get double taxed initially- AMT for paper gains , and then LT or ST for real gains on same spread. Now to fix the double tax issue , you can claim back AMT paid before , however you need to find a tax year where you would not get hit by AMT, and then you can claim credits on that same yearFeb 101
- This is the situation I’m now negotiating. It’s stupid bc they won’t budge and as a result I’m actively seeking work elsewhere bc to me my options mean nothing with this stipulation
- It’s not about being willing to pay or not; it’s that many times startups will offer equity as part of total comp to people who pour blood, sweat and tears into making the company work but who never- even if they wanted to - would be able to afford to buy their options at grant price if they need to leave. So those people who built the company will be left with nothing. IMO if your opinion is that is fair, you shouldn’t even be offering options you should be offering salary and bonus only
- SocialChorus The KidYou can have a third party pay for them, and if there is a successful exit, you will see some benefit. Or you can just exercise as many as you can afford. No matter how much you are making, you should be investing and saving some amount. Disagree that the people you poured their sweat and tears will be left with nothing.... 1) lots of people, of all pay ranges excercize at least a partial amount 2) everybody that built and STAYED will benefit. 3) in my experience, those that left and didn't excercize were the ones whose "mess" someone else had to clean up. Thanks for your sweat, but I often give the most credit to those that are there when it sold, not those that happened to get lucky and pick the right start up, but then not be so lucky (or wise) to be around when it exits
- So true - I’ve been at multiple startups that went for $0. I don’t think people want your credit or care about ‘how you see loyalty’ (whoever you are) they literally just have to make practical decisions like ‘I need to leave this company so I can go move back to my home town/ country and take care of my ageing parent’ or whatever and can not afford to spend even $100k on a bunch of equity that may be worth nothing and get totally screwed. These are just facts
- Is your situation not wanting to pay for the options that might be worthless or not being able to afford the AMT on the paper gains?
- Anyone can afford them, that is ridiculous. There are plenty of companies that will put up the money for you and take a cut. You can find a new job, but you will just find more of the same. I don't understand the entitlement.. Once you leave, why does the company have to give you an interest free perpetual loan?
- But then if they become worthless you have to pay someone back hundreds of thousands of dollars so clearly not ‘anyone can afford them’. And it’s not a loan - if you build a company from a scratch in return for equity as part of comp - you have earned that piece of the company. It’s not entitled it’s been happening since they invented companies!