How can employees protect themselves against expiring equity?

Question

It seems like there's a trend for companies to stay private longer and longer. Double trigger RSUs can't be granted with an expiration longer than 7 years, and options can't be granted with an exercise time longer than 10 years after leaving the company (Zach Holman keeps a handy list of companies granting 10 year exercise windows here [1]).So where does that leave employees? It feels like the calculus on joining early stage startups doesn't seem worthwhile anymore - before you were lucky if you had a liquidity event at all, now you have that plus if it happens at all it's very likely after your shares have expired and the company has no obligation to renew them or make you whole.Is there anything prospective employees can do to protect themselves? Just join later stage / public companies?[1]: https://github.com/holman/extended-exercise-windows

SaberTail · Accepted Answer

There's nothing stopping companies from giving out shares, plus cash to cover the taxes on those shares. Companies don't do that because it costs them more. Options expiring and returning to the pool is a feature, not a bug, to the employer.I'd suggest employees unionize and demand actual shares if they want equity, but individually there's not much you can do.

toomuchtodo · Answer

When dealing with private equity, there is always the risk that your options expire worthless, or your shares are illiquid and it&rsquo;s challenging or impossible to realize a transaction. That&rsquo;s the bargain for exposure to an asset class that (possibly) grows faster than more accessible asset classes like public securities.My personal opinion is that you should not join a startup, as there is quite a bit of risk and very little chance of reward (&ldquo;lottery ticket&rdquo;). Find a different role and buy a few lottery tickets instead.

dian2023 · Answer

I've seen ESOP agreements where after a given period of time the options automatically convert to shares to help mitigate this risk for staff. Worth asking the leadership team as I think its a fair concern that many employees will have