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No, that isn't how options work. Everyone needs to pay...it's just usually when you found a company you're buying options for fractions of a penny. See https:/

No, that isn't how options work. Everyone needs to pay...it's just usually when you found a company you're buying options for fractions of a penny. See https://www.axios.com/behind-wework-founders-700m-cash-out-37b82639-272a-4846-9a43-7deb567b04a4.html https://www.axios.com/behind-wework-founders-700m-cash-out-3... for more info on the $400M loan - it's not clear if it's to purchase his stock options or to pay for AMT...it's likely additional options he was granted through the years at a higher strike price.

sieabahlpark 7y ago
When you found the company you own the shares. You divy out options when you, the founder, hire or make deals. You could alternatively also give actual shares (usually VCs get a share %)
- unaxk38 7y ago
  See the axios article. The $400M was a loan to exercise stock options. You can acquire more options after founding a company as part of a bonus or additional comp...
  - paulsutter 7y ago
    Per the article, “part” of the loan was to exercise stock options, but seriously as founder most of his stock he would already own outright > Neumann used some of the $400 million in loans to exercise stock options in WeWork, per the source.
- the_watcher 7y ago
  That's not usually how it works (WeWork doesn't follow the usual pattern, so they might not have done this). Generally, companies that plan to raise money incorporate, and founders are given options at the strike price at time of founding (generally so small to be effectively free), which vest over time. You also create an option pool that's already reserved for hiring. Founders don't generally hire someone and give away equity they already control, it's almost always from a pool specifically reserved for this. There are startup school lectures on how this works in practice at YC if you want to learn more.
  - malandrew 7y ago
    The face amount on the stock is usually so small that you immediately exercise them for a few hundred or few thousand dollars and file an 83(b)
- pat87 7y ago
  Founders need to purchase shares in the company they found. The shares are extremely cheap as the company has no assets, but you still need to physically wire money to the company bank account. Source: https://stripe.com/docs/atlas/issuing-stock https://stripe.com/docs/atlas/issuing-stock

sieabahlpark 7y ago

When you found the company you own the shares. You divy out options when you, the founder, hire or make deals. You could alternatively also give actual shares (usually VCs get a share %)

unaxk38 7y ago
See the axios article. The $400M was a loan to exercise stock options. You can acquire more options after founding a company as part of a bonus or additional comp...
- paulsutter 7y ago
  Per the article, “part” of the loan was to exercise stock options, but seriously as founder most of his stock he would already own outright > Neumann used some of the $400 million in loans to exercise stock options in WeWork, per the source.
the_watcher 7y ago
That's not usually how it works (WeWork doesn't follow the usual pattern, so they might not have done this). Generally, companies that plan to raise money incorporate, and founders are given options at the strike price at time of founding (generally so small to be effectively free), which vest over time. You also create an option pool that's already reserved for hiring. Founders don't generally hire someone and give away equity they already control, it's almost always from a pool specifically reserved for this. There are startup school lectures on how this works in practice at YC if you want to learn more.
- malandrew 7y ago
  The face amount on the stock is usually so small that you immediately exercise them for a few hundred or few thousand dollars and file an 83(b)
pat87 7y ago
Founders need to purchase shares in the company they found. The shares are extremely cheap as the company has no assets, but you still need to physically wire money to the company bank account. Source: https://stripe.com/docs/atlas/issuing-stock https://stripe.com/docs/atlas/issuing-stock