[nklende]

I had a smaller YC company pitch me something like this as an option for my stock comp - an RSA (restricted stock agreement, or "founder's stock"), where I put up all the cash up front, paid a big income tax bill in the first year, but then upside was all capital gains. I would technically own the stock but I had to sell it back for nothing if I left before it vested.

Turned out I left very early because the company wasn't doing great, in the current climate I think they're probably default-dead. All that cash is just gone.

[nthngtshr]

See, generally speaking I don't think this is a bad deal.

I mean, I don't know the exact numbers / company profile. But I was in a similar situation 8 years ago. I could early exercise and I did. Estimating taxes was a pain (but a fun challenge too, lol). A couple of years ago they finally had a liquidity event and doing all these exercise shenanigans saved me a ton of money, so I'm glad I did that.

The business was doing well and I knew exactly what the risks were and I knew I could afford to lose that money. I joined early so it wasn't that much money to begin with.

I guess my point is that I wouldn't be too dismissive of early exercise / RSAs / etc — for the right kind of person / company it could be a great tool.

[break_the_bank]

Wow. How'd they make you pay upfront and still make you wait & vest? This makes no sense.

[gkoberger]

For what it's worth, this is how it works for founders too. The amount you pay is stupidly small (usually well under $100), since the strike price is essentially $0. There's no legal designation for founder when it comes to stock, so this person just got the same deal the founders did.

[chowchowchow]

This is actually a great deal when the exercise price is low enough. You pay a nominal-ish amount up front to exercise early and all gains are LTCG. It is not a good deal in any situation where you’re not getting in close to the ground floor though, if the exercise cost itself is substantial.