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"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 muc
by 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 agoA friend was early at Square and left options on the table when he left, because the tax bill shocked him.
- jzl 7y agoYep. 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 agoYes, 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