An option grant is a right to acquire a set number of shares of stock of a company at a set price.
We often are asked by clients about common terms for stock or option grants for advisors. Advisors are typically business or technical people that lend their time and expertise to…
When talking to people about option grants, refer to “fully diluted” and always promise a share amount not just a percentage. I often get asked: “When I tell a new hire…
Maybe you’ve been granting options and restricted stock from your equity incentive plan for a while now. Perhaps you and your team have developed a good process – you renew…
In a volatile market, companies may see their stock value drop significantly. This can result in employees and other service providers holding stock options that are “underwater” or “out of…
With special thanks to Jacob Hanna and Blake Martell for their contributions. Issuing option grants to incentivize employees, consultants and advisers is a near universal practice for start-up companies in…
After you set up your new company, one of the first legal documents you will be thinking about is an incentive equity plan, sometimes referred to as an “option plan”…
What is an early exercisable stock option? An “early exercisable” stock option is like any other stock option awarded to an employee, consultant, director or other advisor, except that the…
Many people think a high(er) valuation is the Holy Grail. Those people are (often) wrong. In pursuit of a high(er) valuation, founders often unwittingly give up valuable ownership percentage points…
Most startups offer equity participation in their company to people providing services to the company, whether as employees, consultants, advisors or otherwise (which we will call “service providers” in this…
The basics on stock allocations and option grants
When a company issues options to US employees, there are two types it can choose from: incentive stock options (ISOs), which qualify for special tax treatment under the United States Internal Revenue Code, and non-qualified stock options (NSOs), which do not.
What is a Down Round? A “down round” is a financing in which a company sells shares of its capital stock at a price per share that is less than…
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