I have been grated shares 4 times over the past 3.5 years. One of those grants was as an early employee and I paid for them, so they are fully exercised. The rest have various dates but can be exercised early. I have no plan on leaving. I will stay until we are acquired, go public, whatever. (Any future grants, I can pay for as I get them. I just got 'behind' because I didn't understand the value of doing so.)
-I can exercise the shares for $ 22k. They are worth about $ 1million based on our current valuation and business is booming. It's in a space that is a little tough right now. It will bounce back, but some of the companies that would acquire us have lost billions in valuation this year, which might impact the deal size.
-Our mortgage rate is currently 4.25%. We have about $ 120k equity in our home and have lived in it for 8 years. Our payment is beyond comfortable for us (something like 12% of our take home pay after we contribute to retirement savings, etc.)
-We plan on moving soon. Maybe within the year? We'd like to build and are looking for land, which just takes time. We don't need all of our equity to buy the new home, so the $ 22k wouldn't really impact this in any way. The 22k would either sit tied up in equity in our current home or go towards our next home (but would make little difference in our monthly payment and wouldn't affect the value of the home we could/would buy.)
-I need to exercise the shares more than a year before we're acquired. I can basically backdate the transaction to April if i do it soon (some complicated changes, plus some willingness of the ceo to just take the pile of checks that's been sitting at our now-empty HQ for months now and enter them all in the same date) meaning i'd already be 7 months into the 12 months. This would save me over $ 100k in taxes once we're acquired.
-The business going under is not on my radar right now- we've got about 2 years of runway in the bank, are slightly above break-even right now and are about to have our best month ever and are picking up tons of steam. But our founder told me that IF this happens, he'd pay out what people had paid to exercise basically as a final bonus. I generally trust him, but I also don't 100% bank on this because it's not in writing and you never know what will happen.
-We raised a Series A a few years ago. Have no plans for a Series B anytime soon because it's just not needed.
-I don't have 22k in cash. I have it in a 401k, HSA, 529…but I'm not interested in taking from any of those, for obvious reasons.
Perhaps this is more of a /personalfinance type question, but I wanted to talk to people who had a good understanding of startups and exercising options, so here I am 🙂 How should I be thinking about this?