[nwatson]

That's why, if you can, exercise options before they vest. I bought 3 years of my 4 year initial allocation at my current startup a month after the grant was issued (four months after I joined). I bought at $0.00 gain per share, meaning no tax hit. (Just file that 83(b) form.)

The tax if exercising at this point two years down the road might have hurt.

[jonathankoren]

You can't "exercise options before they vest" because you don't have the option until vesting.

What you describe -- and as someone that was bit by the AMT wrt ISOs, I recommend -- is exercising as soon as they vest to minimize the gain between the strike price and the fair market value at time of exercise. If the FMV goes up, you're going to be stuck paying the AMT on the spread, and not even be able to sell your shares to cover the tax, because pre-IPO stock is effective illiquid. If you wait until after the post-IPO lockout date to exercise, you'll pay even more in taxes, but at least you can sell some stock to cover it. Ironically, this is actually less painful, because you actually have liquidity.

[lavezza]

I did some googling and it does look like some companies will let you exercise early but not let you take possession until vested. https://carta.com/blog/exercising-stock-options/#what-is-ear...

[nwatson]

Wrong, I've exercised pre-vesting at several companies. https://www.cooleygo.com/early-exercisable-stock-options-wha...

[compiler-guy]

TBF, it takes special arrangements by the company granting the options to allow this, and not all do.

[lavezza]

I'm not sure if we were able to purchase before vesting. I'm assuming if you left the company the money for any unvested shares would be refunded?

[nwatson]

When you leave the company can choose to buy back (essentially refund you for) unvested shares, in which case they take back the unvested shares. I imagine any company doing well will buy back the unvested shares.

If the company needs the cash more then maybe they'll let you keep the unvested shares, but since your usually-Common-Stock strike price is typically a lot less than what investors will pay for their Series-X shares it's likely they'd rather take back the Common Stock (?) even in cases of one or more transpired or likely down rounds (?).