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The Good, The Bad, and The Ugly of Startup Options

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Margins
The Margins
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If you were to join an early-stage startup, should you pick an offer heavy on options or cash?

For Options

  • Huge potential upside.
  • Options allow you to make real money by turning your labor directly into capital, which is productive, unlike cash.

For Cash

  • The potential of a tech-bubble burst would make your options worthless.
  • The chances of success for a venture-backed startup are small.
  • Investors and founders have changed the model to their advantage, but no one has changed the model for their employees.
    • Stock options may require 4-year vesting periods when it may take 10-12 years for the company to go public, making it less attractive for employees.

Tip

  • You should be better off with more options, rather than more cash, but only after covering your most essential needs.
  • You should not join a startup hoping for immediate cash in the first place.
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