90-Day Option Exercise Barrier

Shaan Puri and Sam Parr discuss how standard startup option exercise windows create significant financial challenges for employees, potentially forcing them to forfeit valuable equity due to liquidity constraints.

• Standard Exercise Window Problems:

  • Most companies give 90 days to exercise options after leaving
  • Employees often can't afford to exercise within this timeframe
  • Option costs can be substantial ($80K-180K mentioned as examples)
  • Money isn't guaranteed to come back, making it a risky investment

• Real Impact on Employees:

  • Many forfeit their options due to lack of funds
  • Have to choose between keeping earned equity or taking new opportunities
  • Can't access value they helped create due to short exercise windows

• Progressive Company Solutions:

  • Companies like Pinterest and possibly Stripe extending windows to 6-7 years
  • Longer windows acknowledge:
    • The challenge of coming up with exercise cash
    • That employees earned their shares through work
    • Companies might stay private longer
  • This trend is seen as more employee-friendly

• Founder Perspective (Sam Parr's Experience):

  • Even successful founders often appear wealthy on paper but are cash poor
  • Many founders of companies worth hundreds of millions only have tens of thousands in savings
  • Stock value doesn't equal liquid wealth

The speakers advocate for longer exercise windows as a more equitable approach, recognizing that the traditional 90-day window can unfairly prevent employees from keeping equity they've earned.