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Are stock options worth the hype for startup employees?

I wonder if the stock options are really worth the hype nowadays. Cases like Palantir and other unicorn startups that have seen their valuations sliced is really concerning. I wonder if stock options should really guide one in making the decision of joining an early stage venture.

4 Replies

Dan Winter
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Dan Winter Entrepreneur
Helping businesses find innovative ways to achieve results.
I think the decision of joining a startup is one that takes careful consideration of a number of different factors including but not limited to the existing team and their experience, the opportunity for growth both personally and professionally, a passion and commitment to the idea or solution, salary/earnings to meet your financial obligations, and then options. For options to vest and "hit big" the company must be successful in its value proposition and execute flawlessly. Its similar to the roulette wheel at a casino....people keep playing their numbers in hopes of hitting. I am in the midst of diversifying my portfolio.
Joe Albano, PhD
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Joe Albano, PhD Advisor
Using the business of entrepreneurialism to turn ideas into products and products into sustainable businesses.
Well, if you like the idea of working for "tokens" that have a 9 out of 10 chance of being worthless then startup options are the thing for you!!
Steven T.A. Carter
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Steven T.A. Carter Entrepreneur • Advisor
Chief Operating Officer at 1PEL Inc.
Frankly, outside of senior management (equity stakes of .5% or higher) it usually doesn't pay. Even then it is pretty rare that they pay out. I've been fortunate to manage 3 exits where I got some cash for my options as a senior manager. None of them made me a millionaire. My stakes in two were around a half a percent. I am always amazed at CEO's and Entrepreneurs who tell line workers their options will be live changing. Statistically, that isn't likely as an exit is pretty rare. Then you couple that with the small stake most line employees get (10's of thousands of shares at best) and it isn't likely that they'll make much cash out of it. Maybe a nice vacation or a used car. Not a house or retirement at 25. That is my experience. I prefer to pay people real dollars and focus on what working for us is going to do to help them in the future as that is more likely to pay them dividends 5 years forward.
Martin Omansky
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Martin Omansky Entrepreneur
Independent Venture Capital & Private Equity Professional
Options are one of the few low-cost currencies that start-ups have to spend on personnel in lieu of market rate cash. They also involve personnel in the long-term success of the enterprise. If you inclined to take a risk, and you can afford to take a lower salary, then go for it, because despite horror stories, every case is different. Sent from my iPhone
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