A Series of Difficulties Behind Startup Options

Joining an early-stage startup with a passion, obtaining options, going public, and achieving financial freedom -- this may be a career path that many people dream of. But what exactly is an "option", and what is the difference between it and equity? How many steps and pits are there between it and the real money? For entrepreneurs, how to set up an option pool is not only a financial issue, but also a serious legal issue. In this issue, we once again invited lawyer Liu Xiaoxiao, an expert in Silicon Valley corporate law, to share with you the difficulties behind the options of startup companies.

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Guest: Attorney Liu Xiaoxiao (Knowing: Attorney Xiaoxiao Liu, email liuxiaoxiao101@gmail.com)

Hosts: Sean Wang, Cat Chen, Vindy

Editing: Wang Libing

Timeline: Ji Yuqing

Summary of this issue:

What is an option?

00:01:25 The difference between options and equity

00:02:13 What is an option

00:02:53 The size of the options pool

Employee perspective on options

00:03:21 How many options do employees usually get?

00:06:50 Differentiate between employee options and options as financial derivatives

00:09:38 Differentiate between calls and puts

00:11:09 What to do with options when you leave

From options to money

00:15:49 Grant

00:18:28 Attribution

00:22:59 exercise

00:25:03 Realize

00:26:13 The difference between ISO and NSO

Options from a Company Perspective

00:27:44 How to set up an option pool

00:32:41 How to assign options

00:36:00 Common Option Ratio

00:39:39 Chinese option allocation

Various "pits" of options

00:41:59 China-Cayman company's exercise of rights

00:48:31 Tax issues for option cashing

00:50:58 How to deal with options issues