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Paying with options is equivalent to the start up selling stock to investors, paying employee with cash, and then having employee invest the money back into the
by gleb 9y ago
Paying with options is equivalent to the start up selling stock to investors, paying employee with cash, and then having employee invest the money back into the company. As the article points out.
But there are differences. Avoiding income tax. Deferral of compensation to drive retention. Giving employees a better deal than the investors. Letting employees invest into an asset class the government normally prohibits them from investing into. Those are some of the big ones.
- analyst74 9y ago> Paying with options is equivalent to the start up selling stock to investors, paying employee with cash, and then having employee invest the money back into the company. As the article points out No that's not the same, options are basically the right to invest at current valuation. What you described is more like RSU.
- gleb 9y agoCurrent common valuation - insignificant for early-stage companies. Late stage companies do RSUs.
- s73ver 9y agoI don't think anyone could claim that employees get a better deal than the investors, ever.