And it gets worse when you consider that there's still a short limit in which you exercise options after you leave, and the company might not go public in a decade.
A friend of mine works in one of those unicorn startups, and got about a million dollars worth of options at the current valuation. The strike price is about a third of that price. So if she ever wanted to exercise them before the company goes public, she'd have to pony up over 300K (which she doesn't have) and then deal with the taxes. So even if the payday was real, it still means handcuffs until the company goes public, and companies are taking longer and longer before they go public.
So, in practice, regardless of whether her employer will be a successful company in the long run, just being stuck in a job for X number of years before any of that money is real is a big discounting factor.
I think this is a big limitation for those very large startups when trying to hire senior engineers: The risk one takes with RSUs is so much lower the risk with options in a company that has no plans to go public in the next couple of years, it makes so much more sense to work for the publicly traded company.
Not to mention that options can, and do, go underwater at which point they're worthless. I would argue that an option to buy stock at a $15 strike is worth a lot less than 1/16th of a single RSU when the company's current FMV is say, $16, if the company is still private, especially given current market conditions.
You make a great point. I probably wouldn't work for a startup that doesn't extend the exercise period. Fortunately, people are pushing for this and I think it is great for employees. [1, 2] Strong signal that the company thinks about you.
A friend of mine works in one of those unicorn startups, and got about a million dollars worth of options at the current valuation. The strike price is about a third of that price. So if she ever wanted to exercise them before the company goes public, she'd have to pony up over 300K (which she doesn't have) and then deal with the taxes. So even if the payday was real, it still means handcuffs until the company goes public, and companies are taking longer and longer before they go public.
So, in practice, regardless of whether her employer will be a successful company in the long run, just being stuck in a job for X number of years before any of that money is real is a big discounting factor.
I think this is a big limitation for those very large startups when trying to hire senior engineers: The risk one takes with RSUs is so much lower the risk with options in a company that has no plans to go public in the next couple of years, it makes so much more sense to work for the publicly traded company.