[lumost]

I only had options at one firm which was Series D and had ~300 employees. The company issued them at a price which was rich, then steadily issued new options at lower price points. The management made it a practice to have periodic calls which would talk about how they were 12-18 months away from IPO and the price target was going to be ~5x the rich price. Then there would be talks where engineering management would pitch fantasies about how stock pricing worked for IPOs.

Meanwhile growth had stalled, and competition was getting stronger. I left all my options un-purchased. 6 years later when they had a Private Equity buyout I probably would have made somewhere between a -50% and 2x return (depending on liquidation preferences, subsequent issuance, and debt). At best.. I would have had an non-liquid 12% rate of return, losing out to the S&P500 over the last 6 years.

[sbierwagen]

As you say when you mention liquidation preferences, I wouldn't be surprised if a PE buyout of a distressed company zeroed out employee equity.

[lumost]

Yeah, it’s tough to say. Company wasn’t distressed, but it “only” 2x’d over 8+ years. Pretty much a classic flat/no growth situation with modest profitability.

[fatnoah]

It wouldn't have to be a PE buyout for equity to be zeroed out. Any buyout could lead to this, even in a non-distressed company (as pointed out by another poster).

Source: Me w/options in two startups that were acquired by public companies.

[ggm]

long-term average is 6-7% in the big picture. 12% is good, even if it not S&P good.

[spookthesunset]

Yes but remember to think in terms of expected value. Which is kind of the “average” value of all the different return values you might get.

12% is the high end, but what are the probabilities of smaller results? 12% might be the outlier and the expected value might be hovering around zero or less.

[lumost]

Yes, however in a less aggressive tech market the return would have probably been 0. This was also the best case, the P/E buyout and subsequent funding injections may have diluted the value of those shares.

[ggm]

My point was to the people aiming for 100x or better gains. I didn't speak to the downside, you're correct of course: no specific vesting tends to the aggregate, and many are a long way adrift.

[dijonman2]

Options are typically not profitable unless you win the lottery. I view them as a scam and RSUs are met with the same level of skepticism.