But if you actually want to have and hold equity in a company you helped build, and want the most favorable tax treatment, you have to

1. accept compensation in ISOs, likely taking a salary hit

2. exercise, and pay AMT in the exercise year on the spread

3. hold until you can sell, but at least for 12+ months so you qualify for LTCG treatment

So you get hit with a lower cash comp in (1) which is an opportunity cost. Then you have to pay taxes in (2) maybe well before the stock is ever liquid in any way. Then you still have to wait for liquidity (3).

Plus normally the company does not tell you, an ordinary employee, when its beginning fundraising. If it did, you could at least time your exercise so as to minimize spread.

Conversely if I want to take a bet on a public company which I have no relationship to, I just buy and hold. Why is it easier to get favorable treatment for a company I have nothing to do with, versus one that I helped build?