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There was a very good talk (which I can't find right now) by Ben Horowitz about why companies have to use certain instruments for equity-based compensation. There are a number of legal and 'fairness' (HR and morale) issues which limit what companies can and should do.

edit: found it, starts about 16:30 in https://www.youtube.com/watch?v=uVhTvQXfibU

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Not to mention ISOs are far better for employees than NSOs. Moving to RSUs actually reduces the risk and reward for employees as switching over, startups usually cut the grant size substantially (as they are issuing instruments that have intrinsic value at issue rather than no intrinsic value at issue).

tl;dr: Founder shares >>> ISO > NSO >> RSU in terms of risk and reward.

ISOs are not universally better. They have a 24 month time requirement while NSOs only have a 12 month requirement.

I believe selling within the 24 month window is considered a disqualifying disposition which effectively just converts your ISOs into NSOs [1]

[1] https://www.mystockoptions.com/content/what-is-a-disqualifyi...

> There are a number of legal and 'fairness' (HR and morale) issues...

Whatever it was, thank goodness this guy didn't get the memo: https://news.ycombinator.com/item?id=11583480

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