[jjav]

> And, if you exit the company -- either voluntarily or involuntarily -- you often only have 90 days to exercise your options.

This is why I advise everyone that you must early exercise (exercise your option as soon as you start with the company) if you're going to join a startup.

Some startups don't let you early excercise. Run far, far away. Find a different startup. Never join a startup that does not let you early exercise.

[kelnos]

> This is why I advise everyone that you must early exercise (exercise your option as soon as you start with the company) if you're going to join a startup.

That's terrible advice, if you present it in an absolutist, blanket way like that. I do wish I early-exercised at my last startup, since I had a nasty AMT bill when I finally did exercise, and I could have had better tax treatment under the small business qualified stock rules when I finally sold. But: a) early exercising my initial grants would have cost me $40k, which would have eaten into my savings to a degree I wasn't comfortable with at the time, and b) I early exercised at two previous startups, which failed, and that ended up being money flushed down the drain to the tune of around $9k.

Sometimes people want to wait a bit to get a better idea of the company's prospects before investing their own money into it. Maybe they want to hold off until the company has revenue, or hits/maintains a particular revenue or growth metric. Sure, if you're a super early employee and have 5-cent options, maybe you'll feel comfortable gambling that money away (but maybe you won't be!). Yes, there will likely be a tax penalty for waiting, but that can be a reasonable and sound financial decision.

I was (fortunately) a few years too young to get mired in the original '00s dot-com bust, but I know several people who were encouraged/pressured to take out loans in order to (early) exercise their startup stock options, and ended up with worthless or underwater stock, but still had to repay those loans. It would have to be a pretty exceptional situation for me to recommend anyone take that route.

(I do agree that a startup not allowing you to early exercise is a red flag, though.)

[jjav]

> Maybe they want to hold off until the company has revenue, or hits/maintains a particular revenue or growth metric.

It is far too late then.

One of the many benefits of doing early exercise is that you exercise the option when the grant price is the same as the current valuation so there is zero profit (and you file an 83(b)).

If you wait too long, your grant might've been at $0.01 but now the valuation is $5.00 (making up numbers but both of these are in the ballpark of my past startup experiences). It is way too late to exercise those options, you'll be paying tax on $4.99 of profit on a stock that you can't sell and might go down! If you waited that long, now you need to keep waiting until there is liquidity so you can do a same day sale.

> take out loans

That would be a terrible idea. Like I said in parallel comments, if the price is too high for your comfort level, don't join that startup.