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> Thankfully many newer companies seem to be going towards 10 year exercise windows, but they are still a minority I'm actually a bit on the fence for the 10 y
by kevin_nisbet 3y ago
> Thankfully many newer companies seem to be going towards 10 year exercise windows, but they are still a minority
I'm actually a bit on the fence for the 10 year exercise window, as I'm not sure it's always a benefit. As I understand it, startup exits timelines are on an upward trend, so in 10 years will the average exit still be below 10 years, and even then are you working for a company that meets the average timeline. Then, from a taxation perspective, if you do want to exercise before the 10 year expiry, if it's cost prohibitive now, it should be bankrupting after a few more investment rounds and increases to the 409A valuation.
So I'm curious if there is a side effect here that the 10 year exercise window actually leads to many more shares becoming even more cost prohibitive to exercise right before the company reaches a liquidity event and as such not exercised (if you're in the early stage employee group).
- jatins 3y agoYeah, you are right on the point that if you are not able to exercise now you might not be able exercise later also. It's still lesser of the 2 evils imo because: 1/ many companies have liquidity events as they mature. So you may not have to wait for IPO/exit 2/ In 10 years you often know if the companies gonna go anywhere. So if you feel the company's ngmi, might as well not exercise. I have also heard some companies fixing their exercise price (as in its not tied to 409A) to $1 or some small value like this. That seems like the best option