Peter Walker ยท September 5, 2025
Founders Will Get Back 50 Percent of Employee Options
Founders - your startup will get at least 50% of the options you issue to employees back.
In 2025, over 70%(!) of vested options were not exercised when the employee in question left (either by layoff or by choice).
Equity grants typically have a 10-year life, which most startup employees don't stick around for. So basically this chart shows the percent of employees who just let that equity go in the 90-day period after their exit.
Wait, why would an employee not take ownership of their own equity? They earned it after all.
Employees aren't exercising because:
They don't know they have to.
If they do know, they don't have the cash on hand to pay the exercise cost
If they do have the money, ๐๐ต๐ฒ๐ ๐ฑ๐ผ๐ป'๐ ๐๐ต๐ถ๐ป๐ธ ๐๐ต๐ฒ ๐ฒ๐พ๐๐ถ๐๐ ๐๐ถ๐น๐น ๐ฏ๐ฒ ๐๐ผ๐ฟ๐๐ต ๐ฎ ๐น๐ผ๐ ๐ถ๐ป ๐๐ต๐ฒ ๐ณ๐๐๐๐ฟ๐ฒ.
If they do think the equity will be worth enough, they may not think they'll have a chance to sell it before an M&A or IPO event (and that could be years)
Now will secondary sales grabbing massive headlines change this dynamic? They could - but across a wide swath of startups, they haven't yet. I'm sure this chart would look slightly different if we narrowed it to the top 10 AI companies.
Startup equity is a power law game, just like startups themselves. If the vast majority of startups don't end up working, it follows that the vast majority of startup equity isn't worth much.
For employees - don't join a startup for a shiny equity figure that's unlikely to ever become cash. Join because you want the responsibility, because you love the space, because you believe in the founders.
For founders - be generous with those equity grants (within reason). These folks are building your dreams with you, and the data says you'll probably get much a portion of those grants back as employees exit.
#startups #employeeequity #founders #equity #equitycomp