Vesting options at a startup are really like second-order options. If they were granted to you immediately they would just be ordinary options: you have the opt

Vesting options at a startup are really like second-order options. If they were granted to you immediately they would just be ordinary options: you have the option to buy the stock at the strike price. However, since they must vest over a period of time in which you are sacrificing a higher salary, you are also given the option of whether to continue vesting those options (by staying at the company) or not (leaving the company). The second-order option is what makes them valuable. Most startups either grow aggressively during those 4 years or they die. If they fail early, you don't have to sacrifice much salary for the now worthless options. If they are doing well, the options are now worth much more yet you are still only sacrificing the same amount of salary for them. The problem is that the value of this presents a direct conflict between the company and employee. When the value of the unvested options grow, the company can reduce the unvested amount (or fire them if they don't agree)[1] because it will be disproportionate to the value the employee is providing. Note that they don't actually have to go after the unvested shares to recapture this value. They can go after any other form of compensation they are providing since it will still be more than the employee can get elsewhere. Essentially, this means the employee's upside potential is severely limited. Since the value of a share in a startup is based almost entirely on a massively higher future value, this tremendously reduces the value of typical startup vesting options. If I worked for a startup I'd want straight equity. Find the value of the common stock and pay 10-30% of my salary in common stock. The amount of shares will float as the value of the company does, but this is required in order to keep incentives aligned. I'll pay the tax out of my salary (at ordinary income rates). If the company succeeds, almost the entire value derived from the equity will still be taxed at capital gains rates. [1] See Zynga, Skype, and probably many others we never hear about.