19g615kvh76h81 in  
Software Engineering Manager 2 years ago

Does anyone honestly think their ISOs will be worth something?

I've earned these numerous times and have never seen or heard of them ever having value... Yet again, I'm looking at offers that include these and TBH, I want a straight up yearly bonus or much bigger salary. (ie. Put your "ISO"s & "RSU"s in your pipe and smoke them. I prefer dollars.)

Based on all the data points I have, these things are worthless. Can anyone share a story that would change my mind?

19g615kv19afe5Backend Software Engineer 2 years ago
There are many variables involved in equity compensation. This is the way that I think about them: ISOs -- these are issued for pre-IPO companies and are definitely the most risky. That said, not all pre-IPO companies are equally risky. For example, later-stage companies with significant revenues are much more likely to reach the IPO stage than series A startups. For example, Stripe is pre-IPO, but they have significant revenues and could almost certainly successfully IPO at any time that they wanted. When evaluating offers with early-stage ISOs, I consider them a lottery ticket -- potentially lucrative but very low probability of any payoff. Another risky element for mid-stage and later-stage companies is that even if they have decent revenues, they may end up being acquired by a larger company rather than going public through an IPO. In that case, there are typically few guarantees on what will happen to ISOs. In many cases, the acquiring company pays a pittance (or even nothing!) for them (although founders are always paid!). To summarize, for ISOs to pay off, the pre-IPO company must be sucessful enough to have a liquidity event such as an IPO or acquisition. In the case of an IPO, stock option holders may receive a nice payoff if the market values the company positively (as a counter-example, consider Snap whose stock stayed below IPO price for about 3 years until pandemic inflation finally pushed it higher). In the case the company doing well enough to attract the attention of an acquiring company, some combination of the terms of the deal and the generosity of the acquiring company _may_ result in a payoff to holders of ISOs though the common case is little to no payout. I believe it is fair to say that most holders of ISOs receive _no_ payoff for them. RSUs -- these are typically issued for public companies and result in direct ownership of shares of the company's stock. Large, well-established companies such as Google and Microsoft typically issue RSUs as the equity component of their compensation packages. While the price of the underlying stock may vary, RSUs are much less risky than ISOs because they convert to shares of publicly-traded stock which can be immediately sold upon vesting. I would consider RSU compensation to be worth a variable amount somewhere between the 3-year low and the 3-year high of the company's share price. There is still no guarantee of a payoff, but the odds of an RSU grant being worth nothing for a large, stable tech company are substantially lower than the odds that an early-stage startup reaches a liquidity event. I believe it is fair to say that most holders of RSUs receive _some_ payoff for them. Other forms of equity -- there are other forms of equity such as NQSOs or straight ownership percentages that may be part of a compensation package, but these are relatively uncommon and require more careful consideration on your part should you encounter them. Broadly speaking, I consider RSUs in established companies to be nearly as good as cash and ISOs to be a lottery ticket since there are so many ways in which they can result in little or no payoff.
19g615kvh76h81Software Engineering Manager 2 years ago
" most holders of ISOs receive _no_ payoff for them" That's what I think. They're worthless, When convenient, a company will try to position these as a form of payment... I have yet to hear of someone being glad they were paid with more ISO's that dollar bills. Still fishing for a good payout story - anyone got one?