How Valuable Are Stock Options Offered By A Startup?

Startup Professionals Musings

By the way, you will normally only be offered “options,” which vest over a 4-year period after a 1-year “cliff.” Thus, options don’t “pay the mortgage” today, so to speak. Your compensation is the total package of stock plus salary plus benefits.

Understanding Stock Options


In today’s start-up culture, it’s common for companies to offer employees the opportunity to own stock in the business. While most folks know the basic benefits of receiving stock, many employees are taken off guard by the tax implications that follow. Incentive Stock Option (ISO).

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A Different Approach to Refreshing Stock Option Grants

Feld Thoughts

It’s the annual bonus, next year bonus plan, option grant refresh cycle. I’ve never really understood why the majority of stock option refresh grants are stacked grants mid-way through the granting process. Assume you hire someone and grant them 10,000 options with monthly vesting of four years with a one year cliff. That means that after one year, they get 25% of their options and then start vesting the remaining options monthly at a rate of 1/48 (208.3

Should founders get Stock Options?


Founders often ask me whether they should be asking for stock options in their own company. The post Should founders get Stock Options? CEO CFO finance Growing Big Human Resources Management startup Founder compensation Options for founders Startup compensation

How Often Do Employees Of VC-backed Startups Get Stock Options?

Ask The VC

Question: How often do venture-backed start-up employees (let’s say non-executives) get stock option grants? ” It’s pretty standard for every employee of a VC-backed company to get at least a minor option grant as part of their compensation. Employees should expect these grants to vest over time (usually four years) and have a one year cliff (which means the person has to be employed for a year to have any of the options vest.).

Startup Stock Options Are Not Reliable Compensation

Startup Professionals Musings

By the way, you will normally only be offered “options,” which vest over a 4-year period after a 1-year “cliff.” Many employees forget that there isn’t even a market for stock, until after the company has gone public, which hasn’t happened positively to many companies in the last few years.

The CEO of This $3.7 Billion Startup Allegedly Fired Employees Right Before Their Stock Options Vested

Inc Startups

New reports suggests that Tanium's Orion Hindawi fostered a hostile culture at his security startup.

Employee Stock Options Don't Work the Way Most People Think

Inc Startups

Whether you're a founder or an employee, here's what you need to know. Startup

How Much Stock Would Convince You To Join A Startup?

Startup Professionals Musings

By the way, you will normally only be offered “options,” which vest over a 4-year period after a 1-year “cliff.” Thus, options don’t “pay the mortgage” today, so to speak. Your compensation is the total package of stock plus salary plus benefits.

Stock 41

Advisor Stock Option Grants

The Startup Lawyer

Stock Options One asset that startups should consider taking advantage of is advisors. Luckily for startups, advisors are prevalent and can be readily found through incubators, networking and/or personal contacts. The best advisors are in it to pay it forward or give back to the startup community. If you want to take a very informal advisor relationship […].

Incentive Stock Options (ISOs)

Recent Buzzes - VC Experts, Inc.

Incentive stock options must be issued pursuant to a "written plan" which includes the aggregate number of shares to be issued and the eligible employees (or class of employees).

7 Questions Every Employee Should Ask Before Accepting Stock Options as Pay

Inc Startups

Before saying yes to that offer, here's what you need to know about your company's finances

How Do I Protect My Option Grant From A Down Round In The Future?

Ask The VC

What should I expect in terms of protection from both dilution and going under-water on my option prices given that I will be joining before term sheets and close of the round? Will my options be priced based on the previous round? Can I ask for some guarantees about % ownership and stock price post-funding? In some cases, the company will grant additional options to make up some of the difference in dilution. Stock Options down round option grants stock options

How to Discuss Stock Options with Your Team

Both Sides of the Table

Options are gravy - I lived through the first dot com era where we used stock options as a recruiting tool. Options are obviously a very important economic motivator for your first 3-5 employees and your most senior management team. We give out stock options.

Legal Checklist for Startups

Scott Edward Walker

Don’t issue stock options unless a proper option plan is in place and a valuation has been done in compliance with Section 409A of the Internal Revenue Code (see post here ).

The Treatment of Stock Options in the Context of a Merger or Acquisition Transaction

Recent Buzzes - VC Experts, Inc.

A principal issue in merger and acquisition transactions is whether, and to what extent, outstanding options will survive the completion of the transaction and whether and when the vesting of options will be accelerated

Who are stock certificates issued to and when?

Ask The VC

Q: We are a Delaware C Corp registered as a Foreign Entity in Colorado our home state and we need to figure out the answers to the following questions with regards to stock certificates. If you buy the stock, you get the certificates.

Quick & Dirty How-To: Employee Stock Option Allocations

For a company that has raised a first institutional round of capital, this question is important not only when making competitive job offers, but also when calculating what size option pool the company will need before raising the next round of capital. Stock option comparables are hard to come by, so I thought I should post what I dug up for our CEO. Option grants go down as the company gets closer to its Series B, starts making money, and otherwise reduces risk.

Adding a Co-Founder In 140 Characters Or Less

FairSoftware's Blog

Tags: Uncategorized advice compensation entrepreneur entrepreneurship equity incorporation revenue sharing shares startup idea stock options

ESOP Fables: Reviewing The Myths And Facts About Employee Stock Ownership Plans


Employee stock ownership plans (ESOPs) can be an attractive way for an owner to sell a company and for employees to gain an ownership stake. ESOPs are qualified retirement plans that buy, hold and sell company stock for the benefit of employees. by Timothy L.

How to Explain Stock Options to Employees

Inc Startups

If your employees make a mess of their options, it hurts you more than you think. One of the smartest moves you can make is to share the future upside of your company’s growth with key employees by granting stock options. But doling out the options isn’t good enough.

How much should you pay an executive in a startup company?

Startup Company Lawyer

Tags: Stock options

The 1 Thing That Made This the Best Company I've Ever Worked For

Inc Startups

But it's not about buzzwords or stock options in the end. Company culture is a hot topic these days. It's about meeting this basic human need

Can Employee #1000 Get Rich Off of Stock Options?

Ask The VC

Why the Founder of KIND Snacks Gives All His Employees Stock Options

Inc Startups

Daniel Lubetzky, founder of KIND Snacks, describes his egalitarian approach to business

Google Stock Option Re-pricing: Get Over It

Prominent finance publications like the WSJ and the Motley Fool along with several bloggers have recently taken shots at Google with respect to their decision to re-price a boat-load of employee stock options. Just to review the details, in their last earnings call google management stated that they would offer all employees with options that have strike prices above the [.]. Internet Uncategorized Web/Tech Finance Google options stock options

5 Questions You Should Ask Before Accepting a Startup Job Offer

Inc Startups

What you need to know about stock options, pay packages, and what you''re really getting offered

Why Paying Your Workers in Stock Can Be a Tough Sell

Inc Startups

Stock options are an attractive proposition for certain companies, but you shouldn't buy into the practice lightly

Early stage boards work for stock options, not cash.


Pay early stage board members of companies that are not lifestyle businesses one percent of the fully diluted equity in the form of an option that vests over four years of service. The option price should be set by appraisal under IRS rule 409a, and certainly should be low enough to recognize that common stock options are not worth as much as preferred stock, given the many preferences of the latter.

Stock Option Plan Rule of Thumb No. 1

Business Plan Blog

Reserve 10-20% Of Your Company’s Outstanding Equity For A Stock Option Plan. It is critical for a start-up to consider this reality and reserve 10-20% of its outstanding equity for a stock option plan. Most sophisticated investors will require a stock option pool upon investment, and a company that fails to reserve a sufficient amount of equity up-front runs the risk of being forced to establish a pool at a later date that may dilute the founders’ ownership.

Stock Option Plan Rule of Thumb No. 4

Business Plan Blog

If a director or advisor’s term is discontinued, a lenient post-termination exercise period may be very valuable to an option holder. I advise clients to draft the option grant to permit exercise up to ten years after termination, depending on when the option was granted in relation to when the option plan was adopted. This article was contributed by William W Eigner, Esq. & & Brian Headman of Procopio, Cory, Hargreaves & Savitch LLP. .

Stock Option Plan Rule of Thumb No. 5

Business Plan Blog

For advisors, I recommended that companies avoid too much specificity, but nail down the length of service and the option terms, include an indemnification provision, and provide for confidentiality in a written advisor agreement, the term of which may be terminated at any time. This article was contributed by William W Eigner, Esq. & & Brian Headman of Procopio, Cory, Hargreaves & Savitch LLP. . Try Not To Jeopardize Relationships.

Retaining employees: Structuring a Stock Appreciation Rights program

Active Garage

Stock options have historically played a key role in providing incentives for these individuals to stay. In a previous post , we discussed the fact that IPOs and, with them, the attractiveness of stock options have taken a considerable hit in the past few years.

Stock Option Plan Rule of Thumb No. 3

Business Plan Blog

Gradually vesting a director’s and advisor’s options align their compensation with their actual service while protecting the company in the event that they are prematurely removed from the board. In this circumstance, vesting only allows a short-lived director or advisor to receive the fraction of the option package that corresponds with the director’s or officer’s actual term of service. This article was contributed by William W Eigner, Esq. &

Stock Option Plan Rule of Thumb No. 2

Business Plan Blog

Issue Options According To Value Added And Risk Taken. Options are often issued as a reward, either for services rendered or risk assumed by the recipient. It can be difficult to assess the intangible value of certain directors or advisors, and although a high profile individual is generally awarded a larger option package, the industry credibility and networking opportunities a director or advisor offers are not easily appraised.

The Right Way to Grant Equity to Your Employees

Redeye VC

is the virtually universal practice among tech companies of distributing meaningful equity (usually in the form of stock options) to ordinary employees. Before companies like Fairchild and Hewlett-Packard began the practice fifty years ago, distributing stock options to anyone other than top management was virtually unheard of. Andy Rachleff is President and CEO of Wealthfront, a software-based financial advisor.

What the Impending Unicorn Kill Off Will Mean for Startup Employees

Inc Startups

Getting stuck on the horn of a unicorn is risky business for anyone counting on riding their stock options

7 Things You Need to Know About 409A Valuation

Inc Startups

Is your startup planning to offer stock options to employees? Then getting a 409A valuation is essential. Startup

Facebook, Microsoft, and Employee Stock Options=Fraud?

Like a lot of people, I’ve dismissed the Twins case against Zuckerberg and Facebook as sour grapes; yes, they had a bit of a claim, but the real work is in building a compelling app and getting people to use it. Not knowing the details, the settlement seemed fair; connecting people through a website was [.]. Startups

Stock options: Guard the Gold


Use stock options and warrants to pay for service only rarely. Earlier, I stated that stock options are the currency of early stage business. There are times when services of others are available for stock instead of – or in addition to cash. When assessing the relative merit of using attractive non-cash forms of compensation for outside services, first be aware of the true value of your stock.