[StartupQnA] How do I benefit from Stock option in my firm?

Questions that need your attention [courtesy StartupQnA.com, the helpdesk for Entrepreneurs.]. Please hop to StartupQNA site to answer the queries.

Qn: How do I benefit from Stock option in my firm?

I have been working at a 4 year old startup firm for the last 1 year and 4 months. In my last appraisal, I was offered a 2% vested Stock Option by my CEO. Right now, no legal document has been signed or given, only a verbal assurance and an offer letter on the company letter head. The option that he has explained to me is that I will keep getting 0.5% of the Stock Option for the next 4 years (a total of 2%). If I leave after 1 year, I will have a total of 0.5%, if I live after 2 years, I will have 1% and so on. In addition to that, he mentioned that I can monetize this only when either the firm issues IPOs or is sold/acquired.He also said that the detailed Terms & Conditions shall be drafted later.

1. Is it really a good option to stick with the firm for the next 4 years?

2. What all legal formalities need to be kept in mind with regard to this Stock Option?

3. Can it happen that the company doesn’t go public and is neither sold? What happens to my Stock Option in such case?

4. Is it really a profitable option in terms of money?

5. Assuming that my firm’s current value is X million dollars, can I expect to get 2% of X million dollars in cash after 5-6 years?


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