> Getting out for an early employee after funding rounds is expensive
Early exercise and 83(b) is a must, or forget about it.
When considering joining an early startup ask if they will allow you to early exercise as soon as you start (well, it'll be after board approval but as soon as that happens).
If they don't allow that or if the price is too high for your comfort level, don't join that startup.
Every startup CEO must demystify 83(b) for their employees.
If you don't have cash on hand to pay for early taxes, the company can pay a signing bonus or something for those who elect 83(b) to pay for the upfront taxes.
OR
Just pay market salaries and leave the choice to employees to do whatever they want with cash. You want to buy our company stock great here's the grant. You want to put your money in S&P index go ahead.
The employee equity part needs a lot more simplification. I don't know why it is not as simple as
Here are 2 options for you
Salary 200K
OR
Salary 100K Equity 100K
If equity 100K
exercise 83(b) - pay taxes at 200K income
OR
defer taxes for the subsequent exercise dates. (Could land a huge tax bill)
OR
defer the exercise date for a liquidity event/secondary sale.
Those who value risk will take the last option and those who don't will stick to full salary.
83(b) exercise, when presented like this, doesn't seem all that rosy.
There could be some legalities that I am unaware of, but broadly this should work.
Early exercise and 83(b) is a must, or forget about it.
When considering joining an early startup ask if they will allow you to early exercise as soon as you start (well, it'll be after board approval but as soon as that happens).
If they don't allow that or if the price is too high for your comfort level, don't join that startup.