Can anyone eli5 how stock options work at pre-IPO companies? I’ve read you have to “purchase” these options, and that they are not granted to you in an offer.
Check to see if you can early exercise, this will reduce amount of taxes you pay. When you purchase options you may have to pay taxes even though you didn't earn any actual cash. Look up AMT in regards to ISO options. You'll want to understand what happens to your options after you leave the company. You may want to leave or may be forced to leave. Will you need to exercise if you want your options (meaning you may have to pay taxes)? Companies have different rules some better than others
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You're given the option to purchase the options at the strike price. This means if the market (or estimated) price increases then you can still buy at the lower strike price and make a profit. Of course this is all contingent on the company going public or being bought.
After how many successful funding series would you say profit is more likely? Or does it not matter?
Doesn't matter. I've held options at a company that sold within a year, and options at another company that sold after almost 10 years with multiple rounds of funding. Both made me a profit.