| Great writing. One issue with "Forward exercise" tough: by forward-exercising and converting to "Restricted Stock Unit", you avoid the high tax risk, but you also need to pay a substantial amount of cash in advance and bet on the future value of the company. Let's say you get $10k options at strike price $20, you basically need to pay $200K in advance to forward exercise. If the company dies in the future without anexit, you basically lose your $200k. So perhaps the best strategy is to:
1) Forward exercise in several batches as you are gaining confidence of the company (but before the world has much confidence of the company...yet), and try to exercise before the next valuation increase. 2) Delay exercise as late as possible (closer to exit or IPO). But this usually works only if you join a late-stage startup, whose fate is more predictable. If you are a startup, try issue Restricted Stock Units, rather than Stock Options to poor and hard-working employees. That will make your company more employee-friendly. If you are looking for a startup to join, prefer those who issue Stock Units (e.g. Facebook, Twitter, which are not necessarily startups anymore though). |