So is no one naming names of the companies they worked for? Most of this stuff doesn't seem to violate any NDAs and we're all past the quiet period...
Anyway, I was an early rank and file employee at a startup that was acquired by WebMD. When WebMD merged with Healtheon in '99 - which I'm counting as an exit, since our office was shut down shortly thereafter - we were able to exercise our options. I cashed out a third of my vested ISOs to the tune of about $50K. Not FU money, but a nice boost to a 25 year old, and enough to put a substantial down payment on a house.
What I learned:
• Some of my coworkers thought I was loony for cashing out when I did - they thought the stock price would keep going up. And it did - for a while. Remember, this was 2000. We were all out of a job in six months. A bird in the hand, etc.
• Some people cashed out 100%, seeing dollar signs, and didn't get counseled on the tax ramifications. That ended poorly. These were young engineering types who chose not to listen to our awesome CFO/office manager/HR person back when we were a tiny startup. It's amazing how someone can grok Python, and not compound interest.
• The house I put 25% down on in 2000 sold in 2006 for more than twice what I paid for it, while the "nostalgia shares" I kept from WebMD aren't worth one-tenth of what they were in 2000. This was a valuable lesson in the benefits of diversification.
Finally, what I learned was that the only difference between gambling in Vegas and gambling with tech startup stock options is that in Vegas, you get free drinks.
Pardon my naivety, but you mention here that you cashed out only 1/3rd because cashing out 100% had "tax ramifications", even though 6 years later the shares you kept were worthless. Could you elaborate on the tax ramifications that made cashing out 100% a net loss compared to keeping shares that would only depreciate over time? If you cashed out for $50k with a third of your options, why wouldn't cashing out all of them be in the $150k range?
Good question. To clarify: I cashed out 1/3 because I'm inherently conservative financially and had no idea whether the stock would go up or down. Not because of tax purposes.
My colleagues who ran into problems with Uncle Sugar are the ones who bought and held their stock for less than a year (but long enough for it to tank in value), didn't make estimated tax payments and were fined by the IRS, or otherwise made decisions based on irrational exuberance, like borrowing against their options to buy jet-skis and crap.
Anyway, I was an early rank and file employee at a startup that was acquired by WebMD. When WebMD merged with Healtheon in '99 - which I'm counting as an exit, since our office was shut down shortly thereafter - we were able to exercise our options. I cashed out a third of my vested ISOs to the tune of about $50K. Not FU money, but a nice boost to a 25 year old, and enough to put a substantial down payment on a house.
What I learned:
• Some of my coworkers thought I was loony for cashing out when I did - they thought the stock price would keep going up. And it did - for a while. Remember, this was 2000. We were all out of a job in six months. A bird in the hand, etc.
• Some people cashed out 100%, seeing dollar signs, and didn't get counseled on the tax ramifications. That ended poorly. These were young engineering types who chose not to listen to our awesome CFO/office manager/HR person back when we were a tiny startup. It's amazing how someone can grok Python, and not compound interest.
• The house I put 25% down on in 2000 sold in 2006 for more than twice what I paid for it, while the "nostalgia shares" I kept from WebMD aren't worth one-tenth of what they were in 2000. This was a valuable lesson in the benefits of diversification.
Finally, what I learned was that the only difference between gambling in Vegas and gambling with tech startup stock options is that in Vegas, you get free drinks.