Assuming after 2 years, you decide you want to exercise the options that are vested, so you pay your company $500 to get your 500 shares.
Company start going down the tube, and folds out, or is selled at fire price. You end up with basically worthless paper on your hands. So, instead of earning money, you lost. Imagine, that instead of $500 that was 5000, 50000. It is a lot of money.
There are also tax implication, depending what kind of taxing schedule you choose. You can find yourself actually paying taxes, for those shares at the time of excercising, yet when you want to sell, they are worthless.
Double ouch. Also, one thing to consider is that when you exercise options, you have buy those shares. If your company is iliquid (not gone ipo), it might take a long time when (if) you are able to sale them (either it goes IPO, or the company is sold). So, you are tying a chunk of your money, in these shares.
So, as always, buyer beware. Do your own math when it comes in cases like this.