Equity 101

Key takeaways

  • Vested is a platform for managing your equity — from negotiating for equity compensation when you get a job to exercising stock options when you leave your company.

  • Vested provides option funding to startup employees who want to exercise their stock options without using their own cash.

Welcome to the Vested Equity 101 library

We’re so glad you stopped by to learn more. You will find articles and explainers to help you decipher the complex world of startup equity. (This is a good one for starters!) We are adding more content all the time, so please check back again soon.

We want to empower you to make great decisions about your own equity and access what you have earned. 

About Vested

We are a group of startup veterans who have been through the equity process ourselves. For too long, the world of startup equity has been murky and poorly explained to new hires when they start their jobs. And incentives are not always well aligned — employees are starting a new gig and, in all the excitement, might overlook critical details in their equity compensation; meanwhile, employers might be wary of pulling back the equity curtain for various reasons. 

Even if you get the equity package of your dreams, there may be more hurdles: Companies are remaining private longer than ever; the cost of exercising is expensive, especially when factoring in taxes; and the burden of risk is on your shoulders — you have to spend your cash today for an uncertain outcome tomorrow. 

👉 The average length of time for a startup to have an IPO is 12 years.

We wanted to change that so you don’t have to take on so much risk and spend your cash — and make it possible to hold onto the equity you worked so hard to earn. 

Who is Vested for?

Vested is for everyone who has equity in a startup company — from people in their first jobs to leaders in the C-suite. We want to make sure you have the knowledge and tools to make the right decisions. That means everything from keeping tabs on the value of your equity, company, and industry; to learning about strategies to put and keep the most money in your pocket. 

What is exercising stock options?

This has nothing to do with jumping jacks or burpees. This kind of exercising (a legal term) means you’re flexing your right to purchase your stock options. When you exercise, you’ll pay the strike price associated with the options and convert them into shares. You decide for yourself when it makes sense to exercise as there are many factors to think about including taxes, risk tolerance, and prospects for your startup. Another consideration will be whether you want to use your own cash to exercise your stock options or use option funding.

👉 We estimate employees abandon $600B in equity value because they do not exercise their stock options.

How Vested option funding works

When you’re ready to exercise, we provide option funding (yes, we wire you the funds); in exchange for that funding, you deliver a portion of your shares to us in the future when/if you have a liquidity event.

Each deal we do is customized to your personal profile and company. We are able to offer option funding to employees at more than 10,000 companies — more than any other option funder.

What does it cost?

There is no cost to create an account, use our tools, create a dashboard, and get content — we built our free platform to help you get smarter about your equity and manage it.

If you use option funding with Vested, there is a placement fee on the option funding deal; it’s netted into your deal terms and no out-of-pocket cash is necessary.

What happens if my company has an IPO?

We’ll be the first to send you a virtual toast! Congratulations! Your shares will be worth the price listed on the public market. 

If you’re eager to sell those shares once they’re public, remember there is generally a “lock-up period” for employees that lasts for six months. After that, you’re clear to sell your shares on the public market. 

At the time of an IPO (or an acquisition), any transfer restrictions should also be lifted by your company. That means whether you sell or hold your shares, you’ll deliver to Vested the shares you promised in your original option funding deal. 

What if my company is acquired?

If your company is acquired, the mechanics are different than an IPO. The existing terms of your private-company shares are likely dissolved or changed per the new acquiring company.  For instance, the acquiring company may just cancel your shares and replace them with cash or its own shares. Every acquisition deal is different and our equity specialists will work with you to complete your option funding deal.

What if nothing happens to my old company?

First, have patience grasshopper. It’s true that it could be years for your company to have a liquidity event. You may consider selling on a secondary market — or just hang in there. You never know what the future holds! We don’t have a crystal ball but we do know that using option funding from Vested means that you have not risked your cash for this kind of uncertainty.

Have more questions about how Vested works? Email us at hello@vested.co. We'd love to hear from you.

This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for investment, tax, legal, accounting, or other professional advice. Vested does not provide investment, tax, legal, accounting, or other professional advice. You should consult your own investment, tax, legal, accounting, or other professional advisors before engaging in any transaction or equity decision.

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The equity tools on this website are for illustrative purposes only and are not necessarily indicative of future results. No representation is made that results that are similar to those shown can be achieved. Any screenshots or images of these tools contain hypothetical outputs and do not reflect any specific circumstances or anticipated results. See additional disclosures below for more information.

Check the background of Vested Securities, LLC on FINRA's BrokerCheck and see the firm's Customer Relationship Summary here.

By using this website, you understand the information being presented is provided for informational and educational purposes only and agree to our Terms of Use and Privacy Policy. Vested, Inc. (together with its affiliates, “Vested”) relies on information from various sources believed to be reliable, including users and third parties, but cannot guarantee the accuracy and completeness of that information.

Vested, Inc. is a technology company as well as an adviser regulated by the U.S. Securities and Exchange Commission as an exempt reporting adviser. Vested, Inc. also provides free tools to help startup employees understand and make the most of their equity compensation. This includes the Equity Dashboard, Outcome Simulator, Fairness Calculator and AMT Calculator. All company data, including but not limited to valuation, projections and common share price, are estimates derived using public data sets, without any endorsement or influence from the company, and should be used only for informational and educational purposes. These data should not be used as investment advice. The Equity Dashboard allows you to enter your option grant and monitor your equity. The Outcome Simulator allows you to create hypothetical exit scenarios with your own inputs such as exit date and valuation. The Fairness Calculator helps you to see how your option grant compares to those received by other startup employees with similar roles at similar companies. The AMT Calculator helps you understand the possible impact of exercising options on possible Alternative Minimum Tax scenarios. All these tools are for illustrative purposes only and do not constitute tax, investment, financial or any other actionable advice.

While Vested, Inc. is not a broker-dealer, its affiliated subsidiary, Vested Securities, LLC (“VSL”), is a registered broker-dealer and member FINRA/SIPC. Prepaid Forward Contracts (“PFCs”), when brokered, are done so by VSL between share- or option-holders and funds. VSL does not have a direct relationship with investors in the funds.

Nothing on this website should be construed as an offer, solicitation of an offer, or recommendation to buy, sell or hold any security. All investments involve risk, and the past performance of a security or financial product does not guarantee future results or returns. PFCs are highly speculative and are less liquid than publicly traded securities. You should consider these risks and your investment objectives carefully before investing or participating in any securities transaction. Vested does not provide legal, tax or financial planning advice.

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