I have the biggest golden handcuffs: startup equity
I was an early employee at a startup and would really like to leave, but I’ve done the math on TurboTax just now and exercising my vested options would incur into a payment of 240k between exercise cost (40k) and AMT payment on the hypothetical gain (200k). The math is unfortunately correct and matches my back of the napkin calculations (yes, I’m a multi millionaire ON PAPER according to the last fair market value, but the company is totally not going to liquidity any time soon and could easily go under before then, new management is a bunch of fucktards). The company is not allowing secondary transactions and funds such as ESO fund take 50%+ of the proceeds which is horrible. Daaaamn
No risk, no gain. On the other side, you’d better be poor and alive than a dead millionaire 😁
The value of early exercise strikes again.
Yeah, early exercise that the company didn’t allow me to ever do... by the time I had enough vested shares to justify exercising them, the market value was already high to cause significant AMT annoyance. Never again at a startup, founders and investors just take too much advantage of employees.
You weren’t allowed to exercise your options as they vested?
Yeah, this is the problem with non liquid options.
I did some research on this. You can either sell your shares on equidate (now called forge) or loan money from services like ESO fund. The terms of the deal depends on how much liquidity you want and how many shares you're willing to give up. In general, these services are not too employee friendly. Depending on your risk tolerance, you can always exercise some portion of your options for you to keep and use the rest with ESO fund or equidate. You don't have to give up everything or buy everything.
I will look into equidate, though the company is small and not many people heard of it, it’s not like selling shares of Slack... On ESO fund, like I said I contacted them, and they take 50%+ of the proceeds, crazy.
Good suggestion. Equityzen is also a good option. Just focus on the positive side, there are tons people who worked at startups and get burned and walked away with $0...
Are you able to exercise part of it, sell and cash out, then use the new cash to exercise the rest of it?
If they're not liquid, no.
They’re not liquid. They may never become liquid, or become liquid in 24-36 months, which is many tax deadlines away..
So leave? If you are good companies will match. I had similar situation and goog bought me out in cash + gsus dollar for dollar. Experience may very but companies can do this if they want. I had assumed no one would so sharing it's not impossible.
We are talking about 240k post tax that I’m not going to put out of my pocket but that I would need to pay roughly in 90 days. That means I would need a sign on bonus of roughly 400k to cover my tax liability...
Yep, I understood. 400k isn't much to many companies
Money isn’t everything. Promised money isn’t anything.
Tell it to the IRS, since they apparently want money even based on promised money...
That would imply that promised money is worth even less than nothing so my point still stands
How long have you been there for? Take a one or two month sabbatical if you can. Sounds like you might just need to chill out a bit... then when you get back, put in your 40 hours and no more... wait for liquidity if you can, odds are options will cash out... the tax on that still sucks pretty hard but better than a $200k tax bill. Equity programs/taxes are so jacked up sometimes. The 90 day exercise period is not enough for the average employee.
Agreed. It’s a shame company implement the 90 day expiration window. If I could go back, I would negotiate a much longer window, or just not join.
I am assuming you have ISOs in which case the 90 day window is set by law. But yes, the AMT bill from exercising is awful.
Pay the 50% to ESO or leave it all on the table. The other option is to be a depressed sad millionaire
Weird flex, but okay
I just said I want to leave: I’m terribly burned out and close to going in depression because of my job. Does that seems like bragging?
You sort of answered your own question. If you feeding you are going into depression, maybe it's better to cash out whatever you can. Find a better job with good wlb... And save your self the health. You can earn money later in life too