Every year startups get a 409a valuation from an audit firm that determines what their company and shares are worth. The IRS requires that stock options have an

Every year startups get a 409a valuation from an audit firm that determines what their company and shares are worth. The IRS requires that stock options have an exercise price that is equal to or greater than the share price that comes out of the 409a valuation. These are laws, not decisions made by founders/investors. If you grant stock options with an exercise price that is less than the fair market value (share price from 409a), then that's considered income by the IRS and employees owe tax immediately. With ISOs, the 90 day exercise window is required by the IRS. With NSOs, it can be longer, like 7-10 years. 7-10 years is obviously way more employee friendly.