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Generally at private companies you aren't given RSUs. You are given a promise that at IPO or sale you will be given RSUs. If they gave you real ones they would
by spullara 10y ago
Generally at private companies you aren't given RSUs. You are given a promise that at IPO or sale you will be given RSUs. If they gave you real ones they would be taxable but illiquid and you would be in a bad place.
- x0x0 10y agoMany private companies give RSUs then take some back to pay the taxes.
- derricgilling 10y agoIt really depends on the context... the valuation, latest 409A price etc. It's not that one is necessarily better than the other for all cases. You wouldn't want options at Intel or Microsoft since there may not be enough upside to see any delta from the strike price. (and companies can't give artificially low strike prices due to recent IRS laws around fair market value from 409A valuations). For a smaller private company, your strike price may be a third or half of what the last preferred share price is depending on stage of company, etc. With options, you're incentivized to increase the value of the company. On the other hand, RSUs are not usually used as an early employee at a startup since (assuming they are a RSU grant) RSUs are taxed as they vest. With startups having rapidly rising valuations, you would suddenly owe tax on something that is still illiquid. The company or employee would have to pay this large tax. Something not easy if you're a cash poor startup.
- spullara 10y agoAnd they pay the taxes for you with cash? Interesting. Seems like a bad use of capital when there are other options available. Unless of course they have a source of secondary funding that employees can take advantage of.