The Trap and Truth of Stock Options
Everyone says stock options are a goldmine, but here's what it's actually like when you try to exercise them
Stock Options Are Basically a Lottery Ticket, Right?
When stock options come up during a startup interview, your eyes light up. "Our shares are valued at 30,000 won each right now, and we expect around 150,000 won after IPO." You hear something like that and the mental calculator starts running. 10,000 shares times 120,000 won profit... (Let's be honest, everyone does this math.)
But after seven years and three startups, I've realized that almost nobody around me has actually made real money from stock options.
Let's Look at the Numbers
Around 1.3% of Korean startups make it to IPO. Include M&A exits and it's still under 5%. The other 95% of the time, your stock options end up as nothing but paper.
And even if you do make it to IPO, there are problems. Taxes hit at the time of exercise. You get hit with income tax on the spread between your exercise price and market value, and the rate can climb to 38-42%. Even with a 100 million won gain, you only pocket about 58 million won.
On top of that, there's the lock-up period. Typically 6 months to a year after IPO when you can't sell. And it's common for the stock price to get cut in half during that time. (In 2024, about 43% of newly listed IT companies fell below their IPO price within 6 months.)
My Personal Experience
At my first startup, I worked for two and a half years and received 5,000 stock options at an exercise price of 10,000 won per share. Would've been amazing if the company had done well, but after failing to secure funding beyond Series B, they went through restructuring and got acquired. The acquisition price was lower than the total investment, so common stock became worth exactly zero.
That was the first time I learned about liquidation preference -- where preferred shareholders get paid first. Almost no startup explains this upfront, from what I've seen.
The Vesting Schedule: Golden Handcuffs
Most plans are 4-year vesting with a 1-year cliff. Leave before a year, you get zero. After a year, 25% vests, then a bit more each month.
The trap is that even when things go south, you think "maybe I should hang on a little longer because of the stock options." Classic sunk cost fallacy. You've put in two and a half years, so why not stick it out for one and a half more? Meanwhile, you might be missing better career opportunities.
I'll be honest -- I fell for this too. At my second company, around the 20-month mark, I got a better offer somewhere else. But I stayed four more months because I didn't want to lose unvested options. I ended up never exercising those options anyway.
When Stock Options Are Actually Worth It
It's not all bad. Under the right conditions, they can be decent compensation.
If the company is Series C or later, actually generating revenue, and has a concrete IPO timeline, it's worth considering. Make sure the exercise price is well below current fair market value and that you can exercise immediately after vesting.
But the most important thing is: don't treat stock options as a substitute for salary. Don't fall for "the base salary is a bit low, but we have stock options." Cash compensation should be sufficient on its own, and stock options should be treated as a potential bonus.
Cash Is Still King
Evaluate the offer assuming your stock options are worth zero. If the company is still attractive, go for it. If it's not appealing without the options, pass.
I know roughly two people who've actually made serious money from stock options, and both were early employees who stuck around for over 7 years. Everyone else ended up with meaningless numbers. That's just what the odds look like. Still, I'll probably get tempted again the next time a startup waves stock options at me.