Founders Get Back 75 Percent of Options They Issue Employees

Founders - your startup will get at least 50% of the options you issue to employees back.

In 2024, 𝗼𝘃𝗲𝗿 𝟳𝟱%(!) of vested equity was not exercised before it expired.

Typically an equity grant is expiring because the employees left the company, either by choice or through layoff. So basically this chart shows the percent of employees who just let that equity go.

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, they don't think the equity will be worth a lot in the future

• 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)

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 - go ahead, be generous with those equity grants. You'll probably get much of that pool back in any case.

#startups #employeeequity #founders #equity #equitycomp

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