Most employees never make money on their stock options — even if the company ends up being worth a lot!
Why? It’s because of how stock options work.
With options, you don’t actually own a piece of the company — you don’t own any shares. Rather, you have the right (the option) to buy shares at a fixed price. If you don’t “exercise” your option and buy the shares, you never actually get any equity.
Exercise your stock options or miss out.
If you don’t exercise your options and you leave your company, the options will expire, and it’s as if you never had them.
It takes companies 10 years on average to IPO or sell. To get the value of your options, you need to either (1) still be at the company when the big event happens, or (2) exercise the options and get real shares.
Exercising stock options costs real money!
Take a look at your option agreement (it should be among your employment papers). The number of shares x your share price = the price you have to pay to exercise.
Even if you have this much cash saved, it may not make sense for your situation to invest in a startup company. That’s risky business!
Vested funds your option exercise.
We provide you with cash to exercise your options — at no risk to you! (Seriously)
What’s in it for us? If the shares end up being worth a lot, we get some of the upside. (If the shares end up being worth nothing, you have zero obligation to us.)
Of course, you don’t have to exercise. Most employees do nothing at all. That’s why 80% of options end up abandoned. That’s leaving money on the table!