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It absolutely changes the equation. Ask an investment advisor whether you should put all your money in one stock or diversify your portfolio. What will she say?

• dahart 11y ago
  I meant that having a 10 year window vs a 90 day window for exercising options doesn't change the reasons to decide whether to diversify, not that you should or shouldn't diversify. The question of whether to diversify is independent of the terms on your options. I'm not sure I understand- you're saying the 90 day exercise window is a stronger anti-turnaround measure than the vesting cliff? How so? The vesting cliff says you don't get anything unless you stick around, usually for a year, and you don't get it all until four years. Or 3 or 5, whatever. That's a pretty strong anti-turnaround measure. The exercise window doesn't automatically prevent anything, as long as you can afford it, you can walk away and still buy your stock. Some people buy their stocks and some don't, so if you're a pre-IPO startup, the vesting schedule adds a deterrent to leaving 100% of the time, and the 90 day exercise window adds a deterrent to leaving less than 100% of the time. Don't forget you can buy as much stock as you can afford, when you have the option, but if you don't have the option in the first place, you get nada. I do appreciate your stopping to examine any possible unintended consequences, btw, I just don't forsee this causing any problems with turnaround. And it seems like it does solve a real problem with claiming options are part of compensation and then making it harder to realize any benefit. I do honestly believe this could help lower turnaround overall.
  • abalone 11y ago
    > you're saying the 90 day exercise window is a stronger anti-turnaround measure than the vesting cliff? How so? Because practically nobody could utilize that exercise window pre-IPO so it functioned essentially as an "IPO/acquisition cliff" on top of the regular vesting schedule. Do you see what I mean? If you leave before IPO/acquisition you lose your options. Not after 1 or 2 years, but however many years it takes to get to that point of maturity. You have to stick together as a team to make it there. That's bad when companies get to, say, Pinterest or Uber levels and push off their IPO, and that's what needs fixing. But we should be extremely careful about overcorrecting in a manner that hurts vulnerable early stage startups, where the financial logic of leaving to diversify options is strong. Why triple down on one high-risk stock when you can move after a year and diversify your holdings? That kind of logic applied on a large scale could kill small startups which can't handle that kind of rotation. You have to have added incentive at the baby stage to stay and grow the company to maturity.