[_moof]

Don't early exercise.

Here's why. Yes, there are potential tax advantages; you avoid having to deal with AMT, which is significant. But the tradeoff is that you've thrown away the essential advantage that an option gives you: the ability to travel back in time and purchase stock with perfect knowledge of what it will do in the future. Why on earth would you give that up? An option lets you wait years with zero risk and then decide whether you should've invested before that time went by. That is a superpower.

You might be thinking, well, I feel really bullish about this company, so I'm going to go ahead and early exercise. But here's the thing: most startups fail. It is extremely unlikely that your options will be worth anything in the future. So unless you're an unnaturally talented investor—and you aren't, you're a worker bee—you won't be able to beat those odds. And the great thing is, you don't have to—because you have options, the whole point of which is to eliminate risk.

Don't throw away your time machine.

[bagels]

Early exercised, do not regret.

It really depends on the health of the company, risk tolerance, how long you plan to stay, and your strike price.

Paying a few thousand to exercise early to avoid hundreds of thousands in taxes later was worth it for me.

[cco]

Penny wise and pound foolish in my experience for early stage startups.

Don't rush into it obviously, take a few weeks/months inside to get a feel for financials, the business/team etc, but early exercise if you can afford it.

Early exercising may risk tens to low hundreds of thousands of dollars, but the upside is hundreds of thousands to millions through long term cap gains and/or QSBS tax savings.

It also protects you from losing your options if you leave the company, two years into your tenure you might want to leave, but the strike to fair market value spread might have grown so much that you can't afford it in your post termination exercise window.

As always, super dependent upon your particular deal, your financial position going into it etc, do your own math and risk tolerance, but I wish someone had shown me the numbers before I joined my first startup.

[thoughtpeddler]

I think this applies in most cases. That said, many more startups are now bootstrapped, and don't go on to raise beyond a Seed or Series A, if at all.

If you're an early employee at one of those startups (with a very low strike price), and know that the company has a strong balance sheet, I would early exercise to lock in the long-term capital gains tax rate.

This is even more true if the startup has novel IP, which could be worth a healthy sum even if the business were to go kaput.

Also, as others have said, if startups weren't lucrative, VC as an asset class wouldn't exist at all. It's rare, but making millions as an early employee is something that definitely happens.

[dpeck]

this is highly dependent on the strike price.

Though if you're an early enough employee to be getting a strike price that you can exercise without any worry (on the order of $x00) then you probably should be getting stock directly vs options anyway.