Employee Share Options Question For Clueless

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Nodrog2007

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I work in a tech start up.

Was given share options with a vesting period of 4 years.
This period is now over and I can exercise the options.
It's a private company. No IPO.

To exercise the options I will need to buy them which will cost me €30k, plus I will be liable for any difference between what I buy them for and what they are currently worth tax wise.
My question is.
A. I've no idea how much the company/options are currently worth, how can I find out?
B. 30K is a lot of money and it's a big gamble if the company goes bust (I don't think it will be who knows).

I really am unsure what to do.
 
Are there other employees in receipt of similar options? I only ask because it would make sense for you to act collaboratively in that case, possibly up to and including sharing the cost of professional advice if it is deemed necessary.

It's typical for tech start-ups to do successive rounds of fundraising via equity; if so, your employers should be able to advise you of what the last such round effectively valued the company at. If that wasn't very long ago and / or not much has changed in the meantime, then that gives you a reasonable ballpark for tax purposes. It should also inform you as to how much of a risk the 30k investment is.

So if, say, it would have cost you €100k in the last round of fundraising to get the same amount of equity that your options represent, then you could say that you are getting €100k worth of equity for €58k (€30k + [100k - 30k] @ 40%). It's still a risky investment, but at least you can get some sense of the value it represents.
 
Do you have colleagues you can discuss this with? I bet you're not the only person with this on your mind. I'm always amazed how much fruit casual conversations with Peers can yield.
 
Not everyone received them, only those that were here from the start and some have moved onto different companies. The others, I'm not sure who received them so would end up opening a can of worms by bringing it up.
 
Nodrog2007 said:
B. 30K is a lot of money and it's a big gamble if the company goes bust (I don't think it will be who knows)..
Click to expand...
What is the path to liquidity for the company? The risk isn't just that the company goes bust, it's also that the money is locked up until there's someone willing to buy those shares off you, either an IPO, acquisition or a secondary sale. What will the opportunity cost be for you in the meantime?

torblednam said:
It's typical for tech start-ups to do successive rounds of fundraising via equity; if so, your employers should be able to advise you of what the last such round effectively valued the company at. If that wasn't very long ago and / or not much has changed in the meantime, then that gives you a reasonable ballpark for tax purposes. It should also inform you as to how much of a risk the 30k investment is.
Click to expand...
This is also a super important point. There's still a lot of private companies clinging on to their valuations from 2021 fund raises, but they're facing into a downround when they have to go back out to the market. If you think a downround is coming then it might be a good idea to wait.
 
You mention that they have vested and you CAN exercise them now - an important question is, if you want to exercise them, when is the last possible time you can do it? Often there's a time period stated e.g. options must be exercised within xx years of the vesting date. Given that the purchase price is fixed its often the best thing to leave this decision as late as possible - by then 30k might be less to you than it is today and you may have more certainty of the value and how to turn the paper value into actual cash in your bank!
 
I have another 18 months to exercise the options however I'm not really happy working there. If I leave I will need to pay the full €30K

Thank you all for your help and responses.
 
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