Only worth it if you aren’t early. ISOs provide preferential tax treatment, and early on are usually very very cheap, so many companies (mine included) also offer early exercise with ISOs, which is an unbeatable tax win (afaik).

The issue occurs when options get expensive (aka the company is doing well) and then you have to do the math between ISOs or NSOs. The longer expiration may be better, but certainly not for every employee.

That said, as companies get bigger they stop being able to offer as many ISOs (there is a max cap), so at that point they should extend the timeline for expiration.

One thing companies do have to worry about though: a 10-year expiration means your cap table is in flux for 10 years, potentially, which makes calculations, acquisitions, etc, tougher.

But it's only 1 year?

* Bonuses are usually given annually

* Signing bonuses and sabbaticals usually obligate one year employment

A year seems like a very low bar.

as an example, I joined an early stage startup as an exec (potential good deal!), but I would've had to shore 300k to exercise my stocks, pay taxes on it (minimal, that's the huge advantage here), and more than probably see it fail.

now let's play the opposite scenario: you join as an engineer late stage, each ISO might be valued at 10 dollars each. how do you exercise.

this game is skewed towards founders.

in my example, I had to quit for personal reasons and the company was later acquired. however I wan't able to afford, so I got got of $100ks at the time of acquisition.

removing these 90 days time would have let me gain what I was owed.

no hard feelings, because I knew the game, but it was the moment I decided no more startups that have this 90 days BS.

You stay for three years. The exit hasn't come yet because the VCs want to see a higher valuation, but the company has grown and the 409(a) valuation is now $5 / share. You've now vested 60,000 options that would cost you $60,000 to exercise, plus you will have an AMT adjustment of $240,000 because of the difference between the strike price and the current 409(a) valuation. So, exercising those options will cost you $120,000 (ballpark, IANA accountant) in exercise cost and taxes.

Keep in mind you've accepted a lower salary for the past three years because of this stock, so you might not have that kind of cash lying around. And even if you do - are you willing to throw $120,000 into a bet that the company will one day have an exit? Keep in mind that the company may have debt, preferred stock, liquidation preferences, etc. and most companies won't share all their past financing terms with ordinary employees, so it may be hard to estimate what a realistic exit even looks like for your stock. And if you're leaving, maybe you're a little disillusioned with how things are going in the first place? You have 90 days to make this decision after leaving the company and then you lose the stock forever.

For many people, the answer at this point is that they don't want to take the bet - and they get screwed out of a large part of what was supposed to be their compensation.

It's a shitty and exploitative system. I worked at a startup where this exact thing happened to many people who contributed immense value to the company. We had a bumpy year, some management turmoil, etc. and many people left before the IPO and got nothing out of their years of hard work other than a shitty, uncompetitive salary. I will never work for another startup under these terms.

What gets you with waiting, if you have ISOs, is how much AMT hits you. If you're at a >50% IPO company, it's somewhat common to exercise as many options as you can before the AMT hits you.

It's also worth remembering that your 50% startup could be Wework. It's worth $9B, but was valued at almost $47B.