What-If Scenarios and Financing

Option Expiration

Options generally expire 10 years after the grant date. You must exercise them before expiration or lose them.

Termination of Employment

Vested options must be exercised within a Post-Termination Exercise (PTE) window (typically 90 days after leaving the company). Unvested options are forfeited immediately. If you fail to exercise vested options within this window, they expire.

Exercise Funding and Risk

Exercising options requires cash to pay the strike price and, for NSOs, to cover tax withholding. If you exercise options in a private company and it fails before liquidity, you lose both the cash spent on the exercise and any taxes paid.

Alternative Financing

Instead of using personal funds, you can utilize non-recourse financing from specialized equity funding firms. These firms fund the exercise cost and taxes in exchange for a share of the proceeds at exit. If the company fails, you owe nothing, shifting the risk to the financier in exchange for a portion of your upside.

Secondary Market Sales

While you cannot sell options, you may be able to sell shares acquired from exercised options on secondary platforms. This is subject to company approval and right-of-first-refusal (ROFR) clauses in the corporate bylaws, either of which can block a sale outright. Pricing is opaque and the intermediation is not free — transaction fees in the mid single digits as a percentage of proceeds are common — so treat a quoted secondary price as a starting point, not a firm valuation.

Investor Buyouts

During subsequent funding rounds, incoming investors may offer to purchase shares from early employees. The transaction price is negotiated and may differ from the latest valuation.

Contractual Guarantees

Oral promises of stock options are unenforceable. Ensure all equity grants are formally approved by the board of directors and documented in a signed stock option agreement.