How Employee Stock Options Work
Startup employees, here’s what you need to know…
*This article is not intended to be used as investment advice.
A few years ago, I was hired as the first U.S. employee for a Y Combinator-backed startup.
Before then, I had worked in companies of multiple sizes and industries, but I had never worked in an early-stage startup, so I was confused by much of the lingo in my job offer.
I wondered: What is a strike price? What is a normal vesting schedule? How likely is it that my stock options will be worth something? How exactly does an option differ from normal stock? Is an employee stock option similar to a derivatives option that you can buy on an exchange?
I’ve now had the chance to work in two startups and learn much more about how they work. Employee stock options can be a bit complex, but they’re definitely within your grasp to understand.
Here are some of the basics I wish I knew when I joined my first startup…
What Is a Stock Option?
Simply put, a stock option is the right to buy or sell shares of a company at a particular price, for a particular period of time.
