Deal Terms
Stock Option Agreement
A legal document granting an individual the right to purchase company shares at a specified price within a set timeframe.
A stock option agreement is a contract between a company and an employee/advisor granting the right to purchase a specific number of shares at a predetermined exercise (strike) price. The agreement specifies the vesting schedule, exercise window, option type (ISO vs. NSO), and termination provisions. In startups, stock options are a primary tool for attracting and retaining talent when cash compensation is below market.
In Practice
An engineer receives a stock option agreement for 50,000 shares at $1/share strike price, vesting over 4 years with a 1-year cliff, exercisable for 10 years. The options are ISOs, providing favorable tax treatment.
Why It Matters
Stock options are the currency of startup talent attraction. Understanding option mechanics (types, tax implications, exercise decisions) is essential for both companies granting and employees receiving them.
Related Concepts
Further Reading
How Vesting Works at Startups: Cliffs, Schedules, and Acceleration
Your equity doesn't belong to you all at once. Vesting determines when you actually earn your shares — and what happens to them if you leave early, get fired, or the company gets acquired.
What Happens to Your Stock Options If Your Startup Gets Acquired
Acquisitions are where startup equity either pays off or evaporates. Here's how acceleration clauses, liquidation preferences, and deal structure determine whether employees see real money.
What a Series A Process Actually Looks Like
The Series A is where fundraising gets real — partner meetings, deep diligence, and term sheet negotiations. Here's a realistic week-by-week breakdown of what to expect.
How to Negotiate Your Term Sheet: A Founder's Playbook
A tactical guide to negotiating your startup term sheet — which terms matter most, where to push back, and how to protect your interests without killing the deal.
Term Sheet Explained: Every Clause Founders Must Know
Term sheets are dense, jargon-heavy, and consequential. Here's a founder-friendly breakdown of every major clause and what it means for your company.
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