Options are not compensation

This is the last business day I could buy my stock options from LaunchDarkly. But I can’t, because I can’t afford to. Oh, I could maybe afford the stocks – my strike price is quite low – I was employee #21. But I would have to be able to afford to pay the taxes on the difference between the strike price and the fair market value.

When you’re employed at a company, there’s not much incentive to buy your options, because there’s a chance there will be some kind of “liquidity event” when you can get the cash to buy options and pay the taxes by doing some fancy flipping stuff. When you’re not employed at a company, well, you may or may not be earning money somewhere else.

And even if you buy the options and pay the taxes, you are still holding stocks in a small business. Which may or may not increase in value.

It’s hard. We’re talking about a life-changing about of (speculative) money. Like paying-for-college money. And in June, it looked like it was going to work out for us. I had signed papers to sell. But then it fell apart. Not really anyone’s fault, just… the market. Shrugmoji.

It’s hard not to be angry. But angry at who?

I think I’ve settled on “angry at the system of stock options”. If you want employees to be invested in the success of the company, just give them shares. If you want them to stay with you, pay well and make it a good place to work, don’t trap them with vesting schedules. Working at a startup is like buying lottery tickets, but you don’t need to pay to redeem a lottery ticket.

If you’re negotiating a compensation package, remember that it costs the company nothing to give you options. And they will probably get those shares back in the vast majority of cases, because people don’t fully vest, or don’t buy. Our mythology tilts toward the people who win, because that’s a better story than the one that got away. But mostly, the giant fish gets away.

I am grateful for the time I spent at LaunchDarkly. I pivoted my career, met so many fabulous people, traveled the world, learned to do category creation, paid off my own student loans, co-wrote a couple books, and helped create a product that I still really believe in.

But options are not compensation, they’re a longshot bet. Don’t forget.