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You can get non-recourse financing to cover exercise costs and taxes. I.e. you can offload the risk of early exercise for a share of the potential upside. Sour
by forkerenok 6y ago
You can get non-recourse financing to cover exercise costs and taxes. I.e. you can offload the risk of early exercise for a share of the potential upside.
Source: I work at Secfi (https://secfi.com https://secfi.com) and our equity and tax advisors are amazing.
- lemonspat 6y agoCould you explain more on what this means?
- forkerenok 6y agoGladly! Non-recourse financing in this context means that in the event that shares (which are held as collateral) became worthless there is no personal recourse. I.e. your savings, house and whatnot are not on the hook. The contract is just dissolved. In this scenario you spend $0 of your own money on exercise. The "catch" is that you'll have to share the upside in case of a better outcome (according to pre-agreed rates). But the reality is that it's still a better option than just waiting for IPO/acquisition to exercise and sell shares at the same time (so called cashless exercise) [1]. [1] My colleague, Vieje, twitted a great case study on this topic: https://twitter.com/viejep/status/1306364614720909312 https://twitter.com/viejep/status/1306364614720909312