August 29, 2009

On stock options in startups

Aaron Cohen writes a great comment on options and equity in startups (click through to read the entire comment!): "Most startup employees need to realize they are on a journey and that in addition to making a few hundred thousand dollars on a good outcome they are learning how to become more senior at the next company. Real wealth creation will take founding, seniority, or staggeringly large exits."

The blog post itself it also good (even though I don't agree with the statement that strike price is not important when looking at options), but the comments make it really good.

1 comment:

Martin said...

Thanks for sharing this Henrik.

Some more questions: Now what, when you finally get the options you've vested and it's time to cash in the strike price. How do you assure you get a buyer at your assumed market valuation when the stock not easily is traded.

Besides strike-price that you mention, I would also like to underline liquidity preferences. When you dig deeper into the term sheets (if they even let you see them) you'll find things like certain investors are guaranteed X times their investment before you get to split the rest.

Everything you sign can and will be used against you! :O
So many ways to get screwed so probably easier to found the goddamn startup yourself. :)