Startup Stock Options: Is the Golden Goose Dead?

Published in

Diciendo

2 min readMar 29, 2020

Startup stock options don’t seem to be the great deal they used to be 🤔

Keep this in mind when reviewing job offers that might be offering a lower salary with more stock options.

Let me dive in…

Times have changed 👀

“Liquidity events” (i.e. when a company goes public or gets sold) are taking almost twice as long to happen.

In the 20th century, companies would IPO in 6–8 years. Nowadays, companies take 10–12 years to IPO.

Startups are raising “growth” capital from investors rather than going public and relying on raising money from the market.

The idea is that, by remaining private, all the growth that Wall Street benefitted from, goes instead to the private investors.

The more money a startup raises, the more the value of your stock options get diluted by the new money.

VCs tend to have pro-rata rights that allow them to keep their percentage of ownership intact, but employees don’t.

VCs benefit from the upside of keeping the startup private for longer, but employees’ reward gets farther and smaller.

Employees can also remain engaged if they’re allowed to buy their stock and sell it on each round of funding.