Stock Options 💰 Employee stock options explained!

Stock Options 💰 Employee stock options explained!
What are stock options? How are options valued? What is vesting? What happens when the options are exercised? Why should employees value them?
When employees don’t understand options, they can’t appreciate what the company is giving them. In this episode I cover everything they need to know about their incentive stock options.
Read the blog post for this episode here: FeelTheBoot.com/blog/options-...
Incentive stock options are one of the main forms of compensation in startups.
As an entrepreneur, you need to understand how to leverage stock options and equity to motivate your employees. This is all categorized as equity compensation.
Appropriate vesting schedules protect you from giving a piece of your company to an underperforming early hire.
Startup employees need the value of stock options explained to them.
A strong stock options plan can be a key tool for recruiting.

[@FeeltheBoot]

If you are an early-stage founder and would like to get some individual feedback and advice, I provide free office hours weekly. They are exclusive to Feel the Boot members, so sign up free at FeelTheBoot.com/join

[@tacrewgirl]

Best video that I've seen explaining stock options. Clear and concise. Thanks!

[@FeeltheBoot]

Many thanks!

[@stevestojan]

This was absolutely excellent. Making a career change and was offered a good amount of stock options. This is the first video that explained them in an easy to understand way that was thorough enough to hit all the key questions. Thanks so much!

[@FeeltheBoot]

Wonderful! That is exactly what I was hoping to accomplish.

[@amuseinthecraftroom6257]

@@FeeltheBoot do you have any videos on espp and rsu?

[@FeeltheBoot]

@@amuseinthecraftroom6257 Not yet, but thanks for the suggestion. Employee Stock Purchase Plans (espp) are only available to public companies, so they would not be so relevant to Feel the Boot's startup audience. RSU are certainly worth talking about, particularly how they compare to employee stock options. I have two episodes on options. This one, focused on the employee perspective, and one from the founder/CEO perspective kzbin.info/www/bejne/l6iUfHSrbNmiadU

[@brucemcgrath1922]

Wow I love this video! What a fantastic and thorough explanation. I would love to consume more of your content if it were targeted toward corporate finance concepts.

[@FeeltheBoot]

Thanks! That is a great thought. It is not my specialty, but I suspect there is quite a bit more overlap between corporate finance topics and things early-stage founders need to know.

[@FeeltheBoot]

Have you looked at the episode on financials for pre-revenue startups? kzbin.info/www/bejne/ZprIha2grrl4fKc

[@lete93]

Great video! Thank you very much for putting this out.

[@FeeltheBoot]

Thanks! Let me know if there are any other topics you would like me to cover.

[@JDWilliamsPD]

Bravo!

[@LanceMCottrell]

Thanks!

[@Lourd-Bab]

Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got to talking about investment and money. I started investing with $150k and in the first 2 months, my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and get more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.

[@Dunker762]

Hi. I’ve been forced to find additional sources of income as I got retrenched. I barely have time to continue trading and watch my investments since I had my second child. Do you think I should take a break for a while from the market and focus on other things or return whenever I have free time or is it a continuous process? Thanks

[@Lourd-Bab]

@@Dunker762 However, if you do not have access to a professional like JUDITH ANN PEACE, quitting your job to focus on trading may not be the best approach. It is important to consider all options and seek guidance from reliable sources before making any major decisions. Consulting with an AI or using automated trading systems can also be helpful in managing investments while balancing other commitments

[@Dunker762]

@@Lourd-Bab Oh please I’d love that. Thanks!

[@Lourd-Bab]

@@Dunker762 Judith Ann peace is her name

[@Lourd-Bab]

Lookup with her name on the webpage.

[@tylerfriend5861]

Great video thank you - general question. If you are considering leaving a company - do you need to wait for an equity event to occur, or just until you are fully vested to exercise your options? Not a public company so it would be a buy back of the stock by the company. Thx.

[@FeeltheBoot]

Usually, you can exercise your vested options at any time. Whether you want to wait for full vesting before leaving depends on the next opportunity. Some startups will agree to buy back the stock, cashing you out, but others might make you hold the stock until there is a liquidity event. In most cases, you must exercise your options within 30 days of leaving, or they expire.

[@greatmaddyave]

I've watched dozens of videos and read countless articles and no one seems to be able to answer my question. After 4 years Im fully vested and have 30k options at 2.47 however the company has actually devalued in the past year because of covid and a share is valued at 1.97 if I were to buy it outside of options. Does this mean my options have no value and I waited all that time for nothing?

[@FeeltheBoot]

Unfortunately, yes it does. If the company wants to keep you around, they might be willing to reissue the options at the current fair market value. They would still be worthless now but have more potential for upside if the company recovers.

[@GingerDrums]

Music is way too loud... Shame it distracts from the good content

[@FeeltheBoot]

Thanks for the feedback. You are not the only person to think so. More recent episodes have the short music segments much lower in the mix.

[@GingerDrums]

@@FeeltheBoot I mix films for a living in fact. In addition to this being too loud it also has a lot of midrange. You can also reduce the masking / offending frequencies with an EQ, try a broad cut of around 3db to the midrange around 1khz.

[@FeeltheBoot]

That is super helpful! Could you listen to a bit of a recent episode and let me know if you still hear that problem? Maybe this one kzbin.info/www/bejne/jJyUdGmbhrSnbqs Unfortunately, I can't go back and fix old videos without removing and re-uploading them.

[@GingerDrums]

@@FeeltheBoot The music does not have the correct profile for background music. The level is more appropriate, but the song has modulating, distorted midrange exactly in the vocal range, so to put it frankly, its not a good choice. Just leave out the music or pick something way softer.

[@Mr.219]

In other words its really not worth it

[@FeeltheBoot]

It depends on what you value. Many people have gotten very rich from options. Others worked for sub-market wages, and the options ended up worthless. Whether they make sense for you depends on your risk tolerance and immediate need for cash. Working in a startup is an amazing learning experience. Most startups are cash-poor, so they can't pay you what you are worth. Options are an attempt to fairly compensate employees who agree to forego most of their salary. If you don't value the possible upside and learning opportunities, startups are probably not for you.

[@flex1661]

Not true. My friend made over 1 million dollars from a pharmaceutical company buyout

[@addanametocontinue]

The few hundred grand in my stock portfolio from when my company went public would disagree. But you're right, if take a below market salary in return for stock options, it might not be worth it, considering most companies never go public and become valuable.

[@ak5258]

that thumbnail gave me so much anxiety. Eyes so big, lips down, eyebrows up like I fuck up big time.

[@FeeltheBoot]

Ha! 🤣 Sorry about that! I was not going for such a stern aspect.