Category: Tech Leader

Are you moving up the corporate ladder and looking for financial strategies? These articles prepare you for higher level tax planning and ways to use your stock compensation to your advantage.

Navigating IPOs and Incentive Stock Options (ISOs)

If your company is preparing for an Initial Public Offering (IPO), it’s an exciting time—especially if you hold Incentive Stock Options (ISOs). But before you rush to exercise those options, there are crucial considerations that could make or break your financial strategy.

What are Incentive Stock Options (ISOs)?

Incentive Stock Options are a type of employee stock option that comes with potential tax benefits, making them an attractive component of your compensation. They allow you to buy company stock at a set “exercise price,” typically the market value at the time of the grant. The options become exercisable according to a vesting schedule, which usually spans four years, and they come with an expiration date by which you must take action.

If you don’t exercise your ISOs by the expiration date, they expire and are worthless. Generally, you have up to 10 years if you’re still employed, but if you’ve left the company, this window can shrink to as little as 90 days or sooner if your company is nearing an IPO.

Dig out that options agreement to confirm how your ISOs are treated with an IPO! Some sample language can be found in the Reddit stock agreement.

ISOs, if managed properly, may only be taxed at the more favorable long-term capital gains rate. However, you must hold your shares for at least one year after exercising and two years after the grant date. Meeting these requirements means the sale of your ISOs will qualify for long-term capital gains tax, which could result in a significant tax savings compared to ordinary income tax rates.

What are Non-Qualified Stock Options (NQSOs)?

Before diving into the IPO conversation, let’s quickly break down how ISOs differ from Non-Qualified Stock Options (NQSOs).

NQSOs are generally given early on in a startup’s trajectory, to advisors, or as additional incentives as employees reach the ISO limit.

With NQSOs, you’ll pay taxes at the time of exercise, recognizing ordinary income on the difference between the stock’s value and your exercise price. This is a big difference from ISOs, which may be eligible for long term capital gains treatment at their sale.

However, ISOs come with limitations. You can only vest up to $100,000 in value of ISOs in a given calendar year to enjoy this tax benefit. Anything over this amount is treated as NQSOs.

Check your stock portal to see if this ‘ISO/NQSO split’ is occurring over your vesting period. Often, this will happen more in the later years of vesting as the stock value quickly rises.

— Do you learn better from audio or video? Check out this conversation on our YouTube video about this topic HERE —

Be Aware of the AMT Trap

Even though ISOs offer appealing tax treatment, they come with a catch: the Alternative Minimum Tax (AMT). AMT is a parallel tax system that kicks in when certain “preference items,” like ISOs, push your tax liability higher.

The AMT system has only two tax rates, 26% and 28%, and a larger exemption rate (as of 2024). You only see AMT on your tax return if your AMT tax due is larger than your regular tax due.

When you exercise your ISOs, the difference between the stock’s current value and your exercise price (known as the bargain element) is included in your AMT calculation. If you’re exercising a small number of options, you might not notice the impact. However, if you exercise a large number of options, the AMT can take a big bite out of your finances.

For example, we’ve seen AMT taxes due soar to $250,000 or more on ISO larger exercises. So, before you exercise, make sure you have a tax professional in your corner to help you navigate the complexities.

The IPO Opportunity: Timing Your ISO Exercise

So, why exercise ISOs ahead of an IPO?

An IPO creates a liquid market for your company’s stock. By exercising your ISOs pre-IPO, you could lock in a lower stock price and start the clock on your long-term capital gains tax treatment.

However, the stock price could fluctuate dramatically after the IPO, making this a risky move if you expect an IPO soon. NASDAQ research from April 2021 showed that while 34% of IPOs gained over 10% in their first year, more than 50% lost 10% or more.

If your company is eyeing an IPO within the next 18-24 months, now might be a good time to assess how much cash you can afford to put at risk. Exercising a portion of your ISOs each year could help you spread out the AMT cost and mitigate some risk if the IPO is delayed. We like to call this ‘laddering’ our exercises (and potential sales) to minimize taxes across the board.

Not sure if an IPO is in your future? Check out our blog post on when to consider exercising stock options as a pre-IPO company here.

Case Study: Jane’s ISO Strategy

Let’s consider a real-world example. Jane, a long-term employee at a tech startup, is weighing her options ahead of the company’s IPO.

Jane received two ISO grants:

10,000 shares at $0.10 per share, which she exercised early with an 83(b) election.
10,000 shares at $3.00 per share, which she hasn’t yet exercised due to the cost to acquire them ($30,000).

With her company’s IPO on the horizon, Jane and her advisor reviewed her financial situation to determine how much cash she could comfortably invest in exercising her ISOs.

After accounting for her emergency savings and other expenses, she decided to allocate $10,000 toward her stock options.

Together, they calculated the potential AMT liability based on the current 409A valuation and the expected IPO price. By exercising some ISOs before the IPO this year and planning to sell RSUs after the IPO, they managed the risk while maximizing the tax benefits.

The Takeaway: Make an Informed Decision

Exercising ISOs ahead of an IPO can be a smart move, but it requires careful planning. Be sure to evaluate your financial situation, risk tolerance, and tax implications before making any decisions. Working with a financial advisor and tax professional can help ensure you navigate this complex process successfully.

If you’re considering exercising your ISOs before an IPO, weigh the risks, rewards, and your financial goals carefully. With the right strategy, you can maximize your wealth while minimizing unnecessary taxes.

Looking for a Financial Partner in your IPO journey? Schedule a call with us to learn more.

The above discussion is for informational purposes only. Recommendations are of a general nature, not based on knowledge of any individual’s specific needs or circumstances, and there is no intent to provide individual investment advisory, supervisory or management services.

Year End Planning and Setting Intentions for 2024

Each year we reflect on what went well for the year, what could be better, and how we will improve in the following year. Some of the reflections are financial, some are based on improving quality of life, and others are around giving back to the community.

In my reflection this year, my heart is full of gratitude for the lives we touched at SeedSafe Financial. We partnered with our clients to stay the course towards better finances in 2023, and that’s a big deal to me!

Although 2023 did not include the start of a pandemic, or fumbling through what that means in a ‘new world’, the year had its own challenges. Rising interest rates, layoffs, and a stumbling stock market felt heavy at times and caused many to pause and ask the questions:

How long will this last?

Does this change big financial decisions I want to make?

Where do we go from here?

Each year I hear these questions asked in year end meetings and it reminds me that life is full of unpredictable changes that will test our resolve. The best way to stay the course is through a long term vision, reviewing plans, and creating priorities on an ongoing basis.

Build a long term vision of life

What is your most fulfilling life? What are you doing in your most fulfilled life? How are you feeling? Where do you lean towards in this life?

We often skip right over our life vision and the purpose of money. We may go straight to financial tactics: reading up on investment and tax strategies or the ‘top 5 things to do’. We forget – money is a tool to facilitate a meaningful life.

Money may mean different things to different people – comfort, security, freedom, anxiety. It’s how we use money towards our life vision that makes an outsized impact.

Changes happen every year and our vision can lead us through it. Your vision of your life should be your anchor and color all decisions (financial or not) that come your way.

With a vision of your life and the values you want to lean into, the next step is building financial flexibility towards that vision.

Knowing my long term vision of life, how do I feel about last year?

Work and life ebb and flow – some years you will have more time and energy to focus and some years less energy.

Review your time and energy over the last year. What gave you more energy? What took away energy? How can you bring more energy to your life?

An enlightening exercise, The Wheel of Life, reviews major areas of a fulfilled life and asks you to assess how you are doing in those areas. This can help you think more about what needs attention and time in the coming year and longer term.

As humans, we can (too) easily find ways we want to improve our lives. Sometimes this is for ourselves, but sometimes it is what we ‘think’ we need to be happy. Too often we can end up on the hamster-wheel of life. Few on their deathbed wish they had more money.

One caregiver wrote about the experience of working with those towards the end of life and the regrets they had. In The Top Five Regrets of the Dying, Bronnie Ware writes about the regrets:

1) “I wish I’d had the courage to live a life true to myself, not the life others expected of me.”

2) “I wish I hadn’t worked so hard.”

3) “I wish I’d had the courage to express my feelings.”

4) “I wish I had stayed in touch with my friends.”

5) “I wish I had let myself be happier”

It takes time and energy to live a life true to yourself, surrounded by those you love, and free from the ‘keeping up with the Jones’ attitude.

Where can I lean into this year?

Now that you have your long term vision, reviewed last year and identified where you want to grow towards…what could possibly get in the way? 🙂

What can you make a priority this year? How will you make it a priority? Creating SMART goals rears its head again! If you only have so much time and energy, then how you use it will make the biggest difference.

What can you remove from life that keeps you from a fulfilling life?

What can you lean into towards your most fulfilled life?

Considering your time

Each year I review my calendar and rate the activities and events I was part of. What got me closer to my most fulfilled life? What took away from it?

Knowing this, what can I do now to make next year even better? It may include blocking out more days for creative work or scheduling out friend gatherings. I love to host board game nights so I am penciling in those nights now.

Considering your energy

I am by nature an over-doer. I want to do ‘all the things’ and find energy from a jam packed life, but even I have my limits. What helps build your energy? What takes away from it?

Are there activities that ‘must be done’? Who else can do them?

Often I find our clients come to us because they know finances are important, but finances just are not on their priority list in life…and that’s okay!

If money is stressful, anxiety inducing or just ‘not fun’, why would you put more energy into it? This may be an ideal place to begin to outsource and have a thinking partner that helps with money decisions.

The same may go for cleaning your home or cooking. If you don’t enjoy it and you could use that time towards a more fulfilling life, then what can be done to reduce these activities? For some, this may be buying a smaller home, reducing material things, or hiring a cleaning service.

For those who don’t have time to cook or have no desire to, it may mean hiring a meal prep service or buying ‘ready made’ frozen meals.

Each of us are individuals that deserve to be happier, healthier, and living our most fulfilled life.

If you go through the exercise of envisioning your most fulfilled life and find finances are something you want to change, please schedule a chat with us.

We wish you a beautiful holiday season!

What Happens to my Stock in an Acquisition?

Tech professionals have such an interesting life from a stock perspective. You work hard to understand your offer letter, these weird stock things, and what that means from a tax perspective. The fun doesn’t end there – now an acquisition turns your beautiful plans into reality!

What happens to your stock in an acquisition depends on a few things.

The kind of acquisition it is
The structure of your company
What kinds of stock and/or options you have vested

Types of Acquisitions

Acquisition Type – LLC or Partnership

These can be quite a bit trickier. An LLC or partnership may be acquired for their stock or for the assets within the LLC/partnership.

If the LLC / Partnership is acquired by an ‘asset sale’, then your next K-1 will show the character of those gains. This may include: capital gains, ordinary income, interest income, debt cancellation, etc. It may be harder to estimate the impact of the sale. We recommend reaching out to your tax advisor for more information in this situation.

Acquisition Type – C Corps

Let’s say Company X is going to buy Company Y.

Company X will offer a ‘purchase price’ and this can be made up of a few components:

Cash,
Company X stock, and/or
Promissory notes

Depending upon the offer components, this will trickle down in what you personally receive for stock held.

Retention bonuses or retention stock grants will be made to individual star performers. The goal is to retain employees to ensure a smoother transition into owning Company Y.

Many executives find themselves terminated in the acquisition, so review your original contract for an acceleration clause. Does this sound new to you? If so, then we recommend negotiating this in your next compensation package. Find out more here.

What happens if I own stock in a company that gets bought out?

When you own stock in a company, stock certificates will be exchanged for either cash, cash and stock, or stock. It doesn’t matter if the stock is acquired through vesting RSUs or exercising stock options.

Most of the Big Tech companies tend to purchase startups for all cash. Smaller tech companies, who are acquiring another company for technology or market share, may not have the cash to put down. In those cases, a cash and stock purchase makes more sense.

Generally, the timeline goes like this:

Your company notifies you of the acquisition
You parse through legalese to understand if it is a cash purchase, stock and cash purchase, or other type of purchase
There will be an estimated closing date announced where the majority of the transfer will occur (generally within 6 months)
You will be subject to an ‘escrow’ where a certain % of your stock is held until all expenses are settled (within one to two years)

If you acquired the stock long ago, this is the time to review whether you meet the Qualified Small Business Stock exclusion. Read our blog post about it here.

If you exercised options in the last year, you will want to understand what that means for you tax-wise. One of the down sides of exercising ISOs is when you decide to take on a big AMT tax bill in hopes that the price will rise. Only, you find out your company will be acquired less than a year later. In that case, you have a big AMT credit and not a high chance of recouping it. Whomp whomp.

Any cash received will be considered a ‘sale of your shares’ and taxable at the time of the acquisition.

Stock and cash received for your company stock will be taxable to the extent cash was received.

A stock for stock transaction means your original basis and purchase date continues on. This will be portioned between the new amount of shares received by the acquiring company.

Clear as mud? Then it’s time to schedule an introductory meeting with us so we can chat through your particular situation.

What happens to my stock options in an acquisition?

Your stock options may go through a similar process, but on the original vesting timeline.

If you hold vested stock options, the company may pay out cash for these or provide you with a new grant in the acquiring company.

Once the acquisition is announced, you will no longer be allowed to exercise stock options. So if you see a lot of closed doors and people you don’t know coming into the office, that may be a sign to ask what’s up and consider your options 🙂

What happens to my future vesting schedule?

If you have unvested stock options or RSUs, these will move to either future cash payouts or new grants of the acquiring company stock.

You may also receive a retention bonus or retention stock grant as a way to motivate you to remain with the acquiring company for 2 additional years.

Should I sell my stock after acquisition?

If your company is acquired for stock, and it is priced very well, consider selling a large chunk. Many announced acquisitions bring the speculation of a beautiful future together and help buoy the stock price.

Most likely, if your company is being acquired, you had a lot of illiquid shares that were more ‘paper money’ than real money. Now is the time to make the most of the opportunity. Prepare for your future by investing in the stock market and considering your options for furthering your community.

Depending on the type of sale, you may have a great opportunity to do some gifting and charitable contributions with stock to minimize taxes.

Congratulations on your acquisition! If you need any help, please schedule some time to chat with us. 🙂

What to do with stock options at termination

Stock options (ISOs or NQSOs) generally expire 10 years from the date of grant. This makes sense most of the time as the majority of startups aim to go public or exit within that time frame. What we don’t think about is what happens to stock options at termination.

This isn’t the only time you may be wondering what to do. Stock options add to the fun at:

Termination
Expiration and the company is still private
Massive stock growth since grant

This post will discuss what to do with stock options at termination – when you are looking at leaving your job and moving on to the next opportunity.

Expiring Stock Options at Termination

In the recent month, big vests are occurring for many tech companies and tech professionals seem to be reconsidering where they want to be. Add on ‘The Great Resignation’, and your new ideal may be totally different than what you previously thought possible.

When you terminate your position, you generally have 60 to 90 days to exercise vested stock options. Your choices will be different depending on whether you are at a public company or privately held company.

For a Public Tech Company

Stock options in a public company have the value of being liquid due to an exchange you can easily trade them on. You can choose to exercise and hold, exercise and sell a bit later, or do a cashless exercise.

Since you are no longer an ‘insider’ any trading windows would no longer be applicable for future sales.

This is far less complex.

For a Pre-Exit Tech Company

This is far more difficult. If you haven’t exercised options before, you may be sitting on quite a bit of value and the company may or may not allow you to engage in a secondary market sale.

On the one hand, if you exercise your expiring stock options now, the stock will become ‘paper money’. ‘Paper money’ is basically stock in name that is highly illiquid with no known value in between. If the options are NQSOs, you will be paying tax on the value between the 409(a) and the exercise price as if you received that in cash. Ouch.

On the other hand, if the company does well, then the stock may grow to give you a huge payoff.

What to do?? This is a high risk, high value trade-off in the startup cycle. How much cash out of pocket are you willing to lose? Since this is a bit of a crap-shoot on when it becomes liquid and if it turns into something, we keep the cash in hand trade-off front and center.

Some tech professionals consider a loan to exercise the shares. Firms like ESO may offer liquidity now for a piece of the shares at exit. If you are considering this, read the fine print in the deal and consider your ‘cash out of pocket’ as what they could come to you for if it doesn’t turn out as hoped.

If the company allows a secondary market sale, it may be a bit easier. You will be able to exercise/sell some to offset the exercise and hold of others (if that makes sense based on your financial situation). In this situation, we do like to do both around the same time so that you have a ‘known’ market value for the Form 3921 (exercise of stock options). Otherwise, if another sale occurs closer to your exercise, your stock price may jump up and cause you to pay even more AMT. Always consult your tax accountant or CPA when making this decision.

Another Option to Keep in Mind

Do the above ideas sound too risky to you right now? There may be one final option for stock options at termination. Over the last few years this became more and more common – negotiating for a new stock option grant.

Companies like AirBnB and WeWork who saw some turmoil in the moments leading up to an exit were kind enough to recognize:

You worked hard for the company with a promise of stock as part of your ‘compensation’
You should not have to stay at the company to finally get that value
They may be able to get a longer transition period from you at leaving

In this current down market, many tech professionals are jumping to perceived safety in another job. If you are negotiating to leave your job, bring up the above points and asking for a revised stock option agreement. I am making a bit of an assumption – that you were critical to the success of the company over your lengthy tenure so you have the leverage. 🙂

If you have ISOs, they will most likely be forced to become NQSOs due to the IRS rules around total value. For ISOs or NQSOs, the strike price will become the most current value (so higher). The deal won’t be totally equivalent to your prior grant, but it does allow you to participate in some of the growth longer term with no immediate downside.

A little catch in this – the new stock agreement will show the strike price at the current market value. This may also mean that granted ISOs may not be able to meet the ‘$100K in value’ rule and your new agreement could be NQSOs only.

So if you do have some cash you’d like to put towards your stock options at termination, you may want to exercise some ISOs before bringing this negotiation tactic to the table.

There are so many options (pun intended) when you are looking at leaving your company. I hope that you look forward to a better position that aligns with your values and allows you to grow. As always, consider each opportunity to lean into your ideal financial life with care and try not to overextend yourself. Mistakes in stock option calculations can be so costly and disheartening.

If you are struggling with these decisions and how they fit into your financial life, please reach out to us to schedule an introductory chat. Our passion in life is to help guide and partner with our clients for a better financial future that allows you to live into your values.

Tender Offer Basics

During a ‘down time’ in the economy, many companies may turn to tender offers to satisfy grumbling employees who expected an IPO. Other private companies may provide tender offers as the company becomes more mature and stable. This is generally in the later stage of the tech life cycle.

Tender Offers are a funny animal. Each company may do this a little differently. Generally, a funding round with an institutional investor will allow this. Then, it depends on the amount the investor will allow to go to a tender offer vs be invested in the business.

This creates a ‘cap’ of how much employees can sell in shares or options. Usually, we see this at around 20% of shares/options owned or $X (could range from $50,000 to $1M).

The majority of tender offers look at all share types equally. So if you own ISOs, NQSOs, or actual shares, you will be able to determine what mix of those will get you to the total 20% of shares available to tender.

How do you decide what to tender in an offer?

Each type of option (or actual stock owned) provides a different pro/con list of how to think about what to tender.

Things to consider:

For shares you own, are any on their way to being eligible for the QSBS exclusion?

Which options are above water (tender price > strike price)?

What liquidity do I need for the next few years? Do I have enough cash or investments I can pull from at this point?

What liquidity would I like to have for the next few years? Maybe you are working towards a new goal that could use a little extra funding

Do I plan on moving on soon to a new company? If so, then options will expire within 60 to 90 days of termination and will require a big cash outlay to exercise any (potentially)

For ISOs, if you exercise and sell immediately, they become compensation income and are treated like exercising NQSOs

Submitting your Tender Offer request

The company will need to confirm whether you can actually tender the full amount requested. There is always the possibility that a tender offer is ‘oversubscribed’ with more demand than expected. If this happens, the company will reduce the total amount of shares or options you can ultimately tender.

Once the tender offer is complete, review your next pay stub / the summary document you receive from the transaction.

Depending on the shares or options you tendered, the amount of tax withheld through the tender offer may not be enough to cover your total tax bill.

Please make sure you make an estimated tax payment on what you expect to owe in the future. It’s never fun to realize you are short on cash once the tax return is finally prepared.

Use the Tender Offer to Augment your Life

I hope you get to use a tender offer to lean into your values. There is nothing like putting a little more money away towards financial independence, buffering your cash cushion, or helping your community and family towards a better future.

7 Rookie Mistakes Even Your Boss Makes at Benefits Enrollment Time…

Benefits Enrollment season… that lovely time of year where you have less than a month to get your life together (what changed from prior year?) and still meet all your big year end work deadlines.

Side note: This is one of the things I feel like Amazon did right by having a non-year end enrollment period 🙂

There are probably 1000s of blog posts on benefits enrollment topics, but sifting through them means you might miss something big. So instead of restating details on what each benefit means, I’m giving you the short twitter headline and a link to a great blog explaining the topic.

HSAs

Do you have positive cash flow? Maxing out your 401(k)? Contribute to an HSA.

Have an HSA? Not using it much? Look at investing part of it to make the most of the tax deferral!

https://youngandtheinvested.com/what-is-hsa/

Dependent Care FSAs

Are your kids no longer at daycare? What about after school care or summer camps? Might be eligible for this pre-tax benefit.

https://www.fsafeds.com/explore/dcfsa

ESPPs

A forced savings mechanism and a ‘guaranteed’ discount means automatic after-tax value in your pocket.

https://blog.wealthfront.com/good-espp-no-brainer/

Exec Deferred Comp

Okay, I lied, this one is going to be longer than a Twitter headline…

Most of our executives have a ridiculous amount of stock vesting each year through RSUs and NQSOs. Many are uncomfortable with the tax hit they would take for diversifying their risk. Most deferred compensation plans come with more investment options. Therefore, some executives can use this to defer 75% of their salary and bonus, then use NQSO exercises/sales to fund their annual expenses. Thus getting out of a concentrated position and into a more diversified investment strategy.

Using your deferred stock plan might be a great way to diversify out of your NQSO concentrated position. However, it isn’t a fool proof decision. Unless you work at a mega employer that has made commitments to keep these funds as legally safe for you as possible, it may end up not so great.

https://www.nytimes.com/2017/06/30/your-money/should-you-take-advantage-of-a-deferred-compensation-plan.html

Supplemental Life Insurance

Do you need life insurance to cover debts and family needs? If you are young and fit, there may be a better alternative. Check the pitfalls and benefits.

https://20somethingfinance.com/should-you-buy-supplemental-life-insurance-through-your-employer/

Critical Illness Insurance

Are you approaching your 50s and not in the best of shape? If heart problems or cancer runs in the family, this may be a great deal for you.

https://www.thebalance.com/what-is-critical-illness-insurance-4588339

Pet Insurance

This is the time I really wish my dogs could talk. X-rays, blood tests, oh my! We love our pets but hate the vet bills.

https://www.usnews.com/insurance/pet-insurance/what-is-pet-insurance

May the odds be forever in your favor…

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Startup Offer: The Opportunity and Risk

How do you evaluate and negotiate your startup offer?

This year is a crazy year for IPOs. Some have gone well, some have gone terribly wrong, and others never even made it to the finish line (yet). Many of the more eccentric CEOs are now getting pummelled by news media, when they once were media darlings. This doesn’t just affect CEOs, but all employees that trusted that CEO to take them to success. The impact this drama has on employees can be draining and cause anxiety to the point they look at new opportunities. Kind of reminds me of how the news outlets treat stock market coverage…

Anyways, this craziness may have finally pushed you to see what else is out there. No more golden handcuffs! Chances are you are in one of three categories:

you may be looking at a larger tech firm post-startup burnout,
looking to join another startup with your gained wisdom, or
leave the industry entirely

For this blog post, we will cover how to think about your startup offer. This is how we begin the conversation with our clients who are going through the interview process.

In a prior blog post, we covered the main levers in negotiating a better offer. This article is more about the types of questions you should be asking in the process and other resources we are aware of.

We’ve helped techies at all levels consider new offers using the below questions and further analysis. In the end, it breaks down to three things:

Are you asking the company the right questions? Sometimes, we are so focused on the recent hurts/pain we went through that we look to what was lacking and not the whole picture in pursuing our next role.
Have you thought about the effect this job will have on yourself? Just because things may look dire, in your eyes, doesn’t mean you should jump ship for the next shiny object. Make sure you are sure this is right for you.
Analysis to do: I love it when a tech company throws out a number of shares or a total stock value for your stock grant. This doesn’t tell the whole picture and may not help you understand what you are really getting

Questions to Ask the Company

For private tech companies, once you get toward the end of the process, these questions will help you understand a little more. The goal is to learn more about the immediate risks in the business, the direction the business is taking, and what your startup offer compensation actually represents…

When was the last 409A valuation done? Will there be a new 409A valuation required for issuing shares in connection with this position?
How much runway does the company currently have? 12 months or less of cash?
How close are you to raising your next round? What is the high-level impact of the money? Further building out the product? Expansion only? New line of business?
Are you positioning yourself for IPO or looking at an acquisition? If acquisition, who are you targeting? What is your expectation for when an exit might happen?
What kind of accelerated vesting provisions are available for your stock grant? Double trigger or single trigger acceleration? RSUs that required double trigger for vesting?

Questions to Ask Yourself

Start-ups have their own risk, and depending upon your personal situation it may be the risk you need to take to get to where you want to be. Or, it might be a shiny object that is distracting you from what you really want in life.

What is driving you to look at this position right now?
Imagine your best work life, what does it look like to you? What does it allow you to do? Where do you want to go with your career in general?
If you feel you are making less than market rate: if your current company gave you a counter offer for the same compensation, would you take it? How much longer would you be willing to stay?
Do you want ‘walk away money’ at some point? This may mean exiting tech, building your own thing, etc. What would life after ‘walking away’ look like for you? How does this role fit into that goal?
What are your plans for maximizing your current job stock compensation?
- If ISOs, how much cash out of pocket are you willing to risk?
- If RSUs, what will be your strategy for using them vs saving them?
Do you currently budget? Do you feel you have a sense of how much in annual expenses you have? What about savings? What kind of risks can you take at this point in your life?

Not sure the answers to these questions? It may be time to clarify your finances and long term goals with a financial advisor. Schedule a time to chat with us.

Analysis to Do

Review the company in crunchbase.com. Find the company and look at:
- recent funding rounds,
- information on the executives and investors, and
- look into what their previous experience or exits may have been.
Try to find out more about what your market rate for the position might be. Websites like https://www.levels.fyi/ or https://angel.co/salaries may be a good place to start. Search for other sites or use your network to see how much more information you can find out.
Put together a spending forecast for yourself to see what a comfortable cash target could be.

Once You Get a Startup Offer

Evaluate the offer(s) and ask for more information. Often, start-ups and private tech company offer letter state cash salary, number of shares granted, and the strike price. That isn’t the whole picture though! You still need total shares outstanding (i.e. KEY piece of information), ongoing share grant opportunities, or other details around benefits to help make it a more apples to apples comparison.
Understand the dilution risk and chance of what your equivalent total annual comp would be. We’ve put together a basic spreadsheet to help you think about what the all in may be one day.
Look at your current company stock and vesting parameters. What are you giving up? Is it worth it? Understand what decisions you may need to make when you terminate. Remember, most vested options expire within 90 days of termination, so now is the time to consider the costs to exercise and whether it makes sense to.

If you aren’t sure how to move forward on some of these action steps, reach out to us. We do often help clients with their startup offer and evaluate the after-tax cash flow of what these moving parts will do for them in the end.

Best of luck on your new adventures!

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XYPN Live 2019: A Week of Financial Learning

What a whirlwind week! Last week we had the chance to go to the XY Planning Network Conference (XYPN Live 2019) for fee-only financial advisors and it was a blassssstttt. Not only was the conference great, but Jim and I were able to take a 2 hour brainstorming walk session around St. Louis. #MyFav

We presented Stock Options 101 to a packed room of financial advisors looking to one-up their stock compensation understanding and how to think about it with clients. [Shout out to my co-presenter and friend, Shane Mason at Brooklyn FI!]

With our powers combined, we tackled:

how each type of stock compensation works,
what that means in regards to taxes and AMT, and
“Pro Tips” on how advisors can best support their clients/push their clients to better use this to grow their wealth

We may even start a stock comp education series to help all of us. <<if you like this idea, please send us feedback and your stock comp questions>>

We also learned how financial advice is changing. Technology won’t replace the advisor, but it will augment and change our focus. We love technology and we are always looking at how to incorporate more into our business (so if you have ideas for us, please let us know!). In the future, the value of advice will be in empathetic learning and financial engagement.

Aka, creating space for you to pause the treadmill of life, consider your true desires, and then automate ways to get closer to that future.

The advisor of the future is coming fast and it will be such a welcome change from what was ‘advice’ by only providing investment services or products.

To this end, I learned what this change may mean for SeedSafe Financial by engaging in a two-day pre-con with George Kinder. George Kinder is the founder of financial life planning. Taking financial plans from how do your assets and resources get you to your goals to are these even the right goals for you? I already use his ‘three big questions’ often. They help me understand whether the financial plan we put together would be meaningful for our clients, but this took it to another level. [more information on The Three Big Questions can be found in this WSJ article – try them on yourself!]

This pre-con was the emotional hard work it takes to make financial life changes for each of us…starting with myself. I cannot ask someone to do what I cannot do for myself, so to be a life financial planner means I have to be living my best life plan too 🙂

Other big takeaways:

Fee only financial advisors are pretty awesome – I was able to get to know so many planners and learn the story of why they came to the fee-only world. Most started their own businesses, so it was great to learn how others see and do things
XY Planning Network pushes advisors and consumers to be better – knowledge is power, and XYPN LIVE provides it in spades! Even better, they connect all of us and energize us toward change. The conference did not disappoint in this arena
Technology changes…but stays the same. We all want connection in the digital age, so use technology to that end. Automate what you can from a quantitative and logical standpoint. Augment your connection through more videos and meaningful communication

This year is a record for my family and firm in the world of changes and new experiences. I’d like to think those changes will finally settle a bit and allow me the space to talk with you more in the future. To that end, we will be restarting our newsletters and incorporating ‘mini learning series’ on a bi-monthly basis. We will cover our “pro tips” on:

home purchases,
involving kids in family finances,
reviewing your employment benefits, and of course,
stock compensation

If you want to learn more about the power of life habits, cleaning your financial house, and creating your own financial plan, sign up for our newsletter HERE.

Financial Planning Stock Compensation