How do I evaluate an ISO offer from a private company?
July 28, 1999
Subject: Negotiating ISO
Date: Fri, 11 Jun 1999
I am considering a a job offer and the compensation will involve incentive stock options. How do I evaluate an ISO offer for a private company? How negotiable are the terms of such as plan in terms of vesting, dilution etc.?
Date: Wed, 28 Jul 1999
Sorry I haven’t written back to you sooner.
I don’t really have an easy answer for you on this one.
The terms of vesting are negotiable, but limits apply about the value of stock for which you can qualify for ISO benefits when exercising in any tax year.
With a start-up, it can be very difficult to negotiate dilution. It’s expected that the company will be issuing many more shares.
Ultimately, accepting options as part of your compensation package is a “bet” that you expect the company to perform very well in the future, so the options will be valuable. You need to evaluate the prospects and promise of the business.