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I spent most of my 20s (7+ years) at a startup that is currently a “unicorn”, and consequently have an ok amount of shares locked up in the same situation. As

I spent most of my 20s (7+ years) at a startup that is currently a “unicorn”, and consequently have an ok amount of shares locked up in the same situation. As the company’s valuation grew higher and higher the equity grants became significant lower. It was balanced out by my pay becoming more and more competitive vs other large companies. But eventuality I decided ~80% was as fully vested as I’ll ever be — Not to mention my boss and commute were driving me insane — and because I joined so early my options were cheap enough to exercise over time, so I called it quits. Now I’m at a boring public company, commute via train, but with no hope of ever making big $$$ someday. My overall mental health seems a lot better now. I hope I made the right call letting go of that 20%.

huac 7y ago
don't you owe taxes on the stock appreciation?
- heavenlyblue 7y ago
  That’s the first question I had - is that not how it works?
- throwitaway321 7y ago
  I did, but for most of my tenure the company’s valuation was pretty low, meaning my original grants were pennies and the company’s fair market value was depressed, so taxes were manageable. The way I thought of it when exercising was who cares if I lost a few thousand buying lotto tickets. Some of my former coworkers didn’t exercise regularly and are now semi golden handcuffed* *The company extended the exercise period to 10y shortly after I left.
jzl 7y ago
"and because I joined so early my options were cheap enough to exercise over time" --> So you were exercising regularly while the company still wasn't worth much? That's a best-case scenario. The problem comes when early employees have a low strike price but don't exercise until the valuation is high, either because of vesting or just not getting around to it. Anyone with, e.g. 50 cent Airbnb options is looking at a massive AMT hit if they wanted to exercise.
- bsimpson 7y ago
  A friend was early at Square and left options on the table when he left, because the tax bill shocked him.
  - jzl 7y ago
    Yep. That's the conundrum. If the company is doing so obviously well that the shares are likely to be worth something in the future, then they are almost certainly already valued high and have a huge potential tax hit. In hindsight, most hugely successful starts were still a big gamble in their early days when the share price was low and it wasn't the smartest thing to throw thousands, tens of thousands, or even more of your own cash at them.
- throwitaway321 7y ago
  Yes, I exercised regularly so my tax bill was manageable. The company's trajectory looked more like a hockey stick, so my taxes were negligible until later years — and by then my original grants were exercised, leaving only my relatively expensive refreshers with a lower delta to fair market value

huac 7y ago

don't you owe taxes on the stock appreciation?

heavenlyblue 7y ago
That’s the first question I had - is that not how it works?
throwitaway321 7y ago
I did, but for most of my tenure the company’s valuation was pretty low, meaning my original grants were pennies and the company’s fair market value was depressed, so taxes were manageable. The way I thought of it when exercising was who cares if I lost a few thousand buying lotto tickets. Some of my former coworkers didn’t exercise regularly and are now semi golden handcuffed* *The company extended the exercise period to 10y shortly after I left.

jzl 7y ago

"and because I joined so early my options were cheap enough to exercise over time" --> So you were exercising regularly while the company still wasn't worth much? That's a best-case scenario. The problem comes when early employees have a low strike price but don't exercise until the valuation is high, either because of vesting or just not getting around to it. Anyone with, e.g. 50 cent Airbnb options is looking at a massive AMT hit if they wanted to exercise.

bsimpson 7y ago
A friend was early at Square and left options on the table when he left, because the tax bill shocked him.
- jzl 7y ago
  Yep. That's the conundrum. If the company is doing so obviously well that the shares are likely to be worth something in the future, then they are almost certainly already valued high and have a huge potential tax hit. In hindsight, most hugely successful starts were still a big gamble in their early days when the share price was low and it wasn't the smartest thing to throw thousands, tens of thousands, or even more of your own cash at them.
throwitaway321 7y ago
Yes, I exercised regularly so my tax bill was manageable. The company's trajectory looked more like a hockey stick, so my taxes were negligible until later years — and by then my original grants were exercised, leaving only my relatively expensive refreshers with a lower delta to fair market value