Max Brenner in  
Product Manager at Compound2 years ago

AMA with Compound: Understand your startup equity and optimize your finances as a tech employee

Compound is teaming up with Levels to conduct an AMA to help tech employees understand startup equity and optimize their finances. Compound's CEO, Jordan Gonen, will be on hand to answer your questions live in the thread below!


When? Wednesday, August 24th from 11am - 1pm PST


What type of topics will be covered?

  • What are the types and pros/cons of each form of startup equity (ISOs, NSOs, RSUs)?
  • What are the "must know" optimizations you should be aware of like early exercising or QSBS?
  • What are the horror stories to avoid that startup employees fall into like having all their options expire and losing their hard-earned equity?
  • How do I think about angel investing or managing my broader finances?
  • How do I navigate a liquidity event (tender offer, secondary market, upcoming IPO)?
  • Any other questions you have


Can I do anything prior?

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1zm00utkpoisergProduct Manager at Roblox2 years ago
What’s the best way to optimize around AMT? is it exercising at a low price and just rolling with the punches?
Jordan GonenFounder at Compound2 years ago
Hey, great question. For those who don't know — the alternative minimum tax (AMT) [0] is a parallel tax computation that's run every year and _may_ be triggered if you exercise incentive stock options (ISOs). There's no "silver bullet" strategy for optimizing around AMT. Paying attention to your AMT threshold/obligations annually (especially when you exercise your stock options) is a great first step. A lot of people are sticker-shocked by the huge AMT obligations they may owe when things are going well—you'll want to avoid that if you can by being proactive with your equity. You should recognize that AMT you pay can often actually be used as a credit to offset tax obligations in future years—so my suggestion is to work with a financial and/or tax advisor (obviously I'm a bit biased but would check out to build a cashflow plan to figure out "how much can you exercise each year" before triggering AMT. There's way to plan such that you "optimize AMT" BUT it is hugely dependent on how the 409A valuation of your company changes over time. I'd encourage seeing your strategy play out in BOTH the best and the worst case scenarios. Remember that doing nothing is still a decision. [0] For some fun tax history, back in 1969, 155 individuals with incomes over $200,000 managed to pay zero federal income taxes, triggering popular outrage. The AMT was introduced to prevent this from happening again.