[brianmcconnell]

I am currently dealing with this issue, though on a smaller scale.

The moral of the story is to forward exercise options if you can. Basically what this means is you pay to exercise on your start date. If you quit or get pink slipped before the standard one year cliff, the company does a buyback. Otherwise, the shares vest as per your vesting schedule. You can potentially avoid a lot of the AMT nastiness this way, and start the clock on long-term gains treatment on day one.

That said, companies really should scrap the 90 day exercise window. Uber et al want to avoid employees selling shares on side markets. If they just allow them to hold onto their options for years, most will sit on them rather than feel rushed to sell. I know they want to retain talent, but they should be doing that via rewards versus punitive measures.

In any case, its worth it to spend a couple hundred bucks on a tax expert to figure out in advance how to handle options so you don't get burned by taxes on fictional gains.

[aetherson]

It's different with Uber in hindsight, but in general, employees at start-ups are already overinvested in the success of the start-up, and that success is unlikely. I don't recommend that most people also sink their cash into their employer.

[zwily]

Usually you do an early exercise when the company is very young, with a low strike price. In those cases, the cash outlay can be very small.

For a later stage company, then math works differently, of course.

[redshirtrob]

Be careful, the company may not be required to buyback the shares. The company may have the option to accelerate the vesting schedule on the options. It's best to assume they'll choose to do this only when it's optimal for them, which likely means when it's suboptimal for you.

[brianmcconnell]

It's a real dilemma, as the company is doing well enough that the 409a value is not trivial, but its not clear that they will have a liquidity event in the near term. So on one hand I don't want to get screwed on a fictional profit on taxes, but on the other I don't want to forfeit the options as I earned them, and as far as I am concerned, that was part of my compensation for taking below market salary.

It bothers me that the terms are unnecessarily anti-employee. 90 days simply isn't enough time, especially when critical details related to the cap table and liquidation preferences are obfuscated. If they are not prepared to buy shares back at 409a value, they should allow an extended exercise window.

[nraynaud]

Happened to me. (Not a big sum)