The real question is, when do you "buy in" to a valuation. Things are only worth what someone else will pay. So if you don't have evidence that there is a buye

The real question is, when do you "buy in" to a valuation. Things are only worth what someone else will pay. So if you don't have evidence that there is a buyer eagerly wanting to pay $5/share for the options you are getting for $4/share, don't assume they are worth anything. Because of dilution math, it's very rare for employees of all but unicorn startups to cash in at anything close to the expected value of the shares. That means that your 50K shares awarded after a $5M series A (on a big pre money valuation) are not going to be worth much if the company sells for $10M the following year. Founders should set up a chart that tracks the various possible outcomes and lets employees understand what their options will be worth in those scenarios and see what the founder would get in those scenarios. This would allow additional shares to be given to valued employees if the company turns out to be a beautiful white horse but not quite a unicorn. The thing to be aware of is when the founder has the option of cashing out for $10M and the employees effectively getting nothing. If this happens the investors will have essentially lost interest and will potentially get their investment back but will not mention the deal to anyone again. This is a sort of perverse incentive because the founder will be inclined to deceive employees into thinking a big exit is on the way, while simultaneously negotiating a low millions acquisition and high salary at the acquiring company. In that scenario, the founder should have to renegotiate so that the most valuable employees get at least 10% of the founder's payout, but employees rarely have (or use) that much leverage with the founder.