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Bravo bravo bravo! This piece neatly encapsulates all the problems with ISOs. The biggest one is mentioned at the beginning - information asymmetry. I don’t rea
by brd529 6y ago
Bravo bravo bravo! This piece neatly encapsulates all the problems with ISOs. The biggest one is mentioned at the beginning - information asymmetry. I don’t really understand why most companies, especially small ones less than 100 people, can’t be transparent about their cap table with employees.
I do think the culture around 90 day exercise Windows is changing. Here is a list of companies with extended windows [1]. At this point I would never join a company with 90 day windows.
[1] https://github.com/holman/extended-exercise-windows https://github.com/holman/extended-exercise-windows
- alecbenzer 6y agoAFAIK the 90 day thing was more of a legal thing than something the companies themselves wanted to enforce?
- brd529 6y agoIt's true that a company can't issue ISOs if the termination window is more than 90 days, they have to be NSOs instead. IMO the downside of the NSOs (pay tax immediately upon exercise instead of at next year's tax deadline - ISOs don't actually change the amount of tax that is due, just the timing of when you pay it) is small compared to the very real risk that your options will go poof if you don't have the cash to exercise and pay tax if there is a termination event.
- rsanek 6y agoStartups can easily opt to convert ISOs to NSOs after the 90 days -- but of course, they typically do not.
- C1sc0cat 6y agoThe UK is much better in this regard as the HMRC has rules for approved option schemes - I have EMI shares in my current employer
- rsanek 6y agoNo, by law ISOs just convert to NSOs at 90 days. Startups themselves decided to expire them, there is nothing preventing them simply allowing them to change. You get worse tax treatment, of course, but at least you get to retain the ability to participate in the upside.