Stock option are not a "future bonus"

One of the worst takes I hear from both executives and employees at startups is that stock options are an additional future bonus to your compensation. That is wrong. Stock options are your compensation, not a potential addition in the future.

Startups and growth private companies issue stock options as a way to compensate employees for the lack of cash compensation they may be willing to pay. If you are worth $100k at a larger company, but the startup can only afford to pay you $80k, they may decide to pay you the additional $20k with equity. This equity is granted as part of your compensation package.

Employees and executives who plan around their equity as a potential future bonus are missing the mark. If you view your equity as a future bonus, you are going to treat it as a future event and lose out on the upside. This is the answer many at startups default to because, well it’s the easiest route. It’s a future event, so I’ll deal with it in the future.

In reality, equity is granted to you today. There may be restrictions on what you can do with it so the benefits are not as readily apparent, but once you exercised your vested options, they are yours to keep. Yes, there’s always the chance that they make not be worth anything in the future, but you better believe that it is part of your net worth today. Start planning accordingly.