Are options worth it?

In the last startup I worked for I got some options, but since the exit was an acquihire, they ended up being meaningless and the only factor was retention bonuses.

Now, I’ve been asked to consult for a startup, being founded by someone I know well. I think it has a reasonable chance of success given the situation. I want to figure out what I can do to make sure that I don’t just end up with a bunch of meaningless options again, especially as M&A and acquihires seem to be the norm these days. Any ideas? What do people who have been around the block a few times do these days to protect themselves?

  • If the company is successful it won’t be an acquihire. M&A involves buying the company hence your options would be worth something. The only clause I’d add is an acceleration vesting clause in case of an acquisition.

    • “hence your options would be worth something”

      Not true. Depends on the legal form of the company (my text applies to limited liable companies), but if you get an option it usually means you get the option to buy % shares (ownership) for X EUR.

      Now if the person has no shares to sell, well, there goes the option.

      It’s like if I say “hey you can buy my piano for 1.000 EUR”. If I sell it in 2 weeks, no way you could get it. If you don’t redeem your option it’s your “fault”.

    • I don’t think you can predict what people will get in an acquihire situation. In my previous experience it was all retention bonuses independent of stock or options.

  • 90%+ of the time, options are the equivalent of Schrutebucks. They’re worthless. Great if they end up being worth something, but don’t count on it. Focus on getting paid in salary, bonus, cash. If you still care about options, focus on early vesting triggers and accelerators.

  • The Valley was built on options. Don’t be so quick to dismiss them. 90% of options may be worthless, but that has nothing to do with options. It has to do with the volume of crappy companies that get funded in an easy money environment like the one we live in today. Pick your companies diligently. Work hard. Learn. Rinse. Repeat. It pays off. Eventually.

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