Sorta. You could definitely go in on something worthless that never gets any traction and end up with less than zero, as in, you owe money after the experience. But for every Stripe or Airbnb there's 100 more lesser known names that still pay out, not in the millions, but a couple hundred thousand dollars range, which is still enough to change most people's situation.
Definitely look at them as worthless untill they're worth something, but the untold secret is the secondary and private market. SpaceX employees have gone that route and some are quite rich despite there not being an IPO. Again, the failure mode to be aware of is you could end up in debt and owe money which is worse than if you'd never played.
> Definitely look at them as worthless untill they're worth something
One (of numerous) problems with stock options is almost all stock option contracts require you to exercise within 90 days of leaving the company.
Often times employees leave a company, and then need to decide within 90 days whether they will spend anywhere from $5-50k+ to exercise the options to keep the stock, otherwise you forfeit the options after 90 days.
The stars really have to align for you to make money with options without risking/gambling your own capital by exercising them.
Unfortunately secondary markets only exist for very large companies like Stripe. I’m not aware of secondary markets for small < 100 person companies, which is where you see the most blatant hyping up of stock option value.
> without risking/gambling your own capital by exercising them.
Many companies offer early exercise, so you can reduce the amount you gamble by a lot.
Also, you already "pay" in terms of opportunity costs by being at that startup vs something more established where you get RSUs of a public company. So using some of the money from the startup in order to exercise the shares is really useful. If the startup's cash compensation is just enough to pay your bills, then of course it's different.
I can't speak to their individual deals, but Hiiive, Forge, and ESO fund are all working with companies that aren't stripe sized.
But absolutely no one should read this and think anyone's paper valuation is worth actual dollars until the money hits your bank account.
There are companies that will finance your options exercise in exchange for a cut of the earnings in the event of an exit. I haven't personally used one, but they do exist.
There’s a much better option - simply offer nso conversion with much longer exercise window
and the most important thing someone told me is that 100% of $0 is $0. x% of a big number > $0
Yeah, but you should try to shop for a deal where 100 - x is as big a number as you can negotiate.
Oh absolutely, the important bit is that 100% of $0 is $0.
> You could definitely go in on something worthless that never gets any traction and end up with less than zero
Absolutely agree
> Lesser known names that still pay out, not in the millions, but a couple hundred thousand dollars range
FTR This is the same for lottery tickets, they don't all win the top prize (or a share of it), most will win a few dollars, some tens of thousands, and so on.