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1. B O R R O W E R G U I D E : S T O C K O P T I O N S

2. S T O C K O P T I O N S 1 0 1

3. R E V I E W T H E A G R E E M E N T
H O W M A N Y D AY S D O Y O U H AV E T O E X E R C I S E
Y O U R O P T I O N S ?
Y O U T Y P I C A L LY H AV E 3 0 O R 9 0 D AY S T O
E X E R C I S E Y O U R O P T I O N S O R R I S K L E AV I N G
T H E M O N T H E TA B L E .
A R E T H E O P T I O N S G R A N T E D I S O ( I N C E N T I V E
S T O C K O P T I O N S ) O R N S O ( N O N - Q U A L I F I E D
S T O C K O P T I O N S ) ?
M O S T T E C H S TA R T U P S U S E I S O — T H I S I S
I M P O R TA N T B E C A U S E T H E R E A R E D I F F E R E N T
TA X I M P L I C AT I O N S F O R N S O .
W H AT ’ S T H E S T R I K E P R I C E P E R S H A R E A N D
W H AT ’ S T H E F M V ( FA I R M A R K E T VA L U E ) P E R
S H A R E ?
T H E S T R I K E P R I C E I M PA C T S T H E C O S T T O
E X E R C I S E ; T H E F M V I M PA C T S Y O U R TA X
S I T U AT I O N .

4. TA X C O N S E Q U E N C E S
• In addition to the cost to exercise your options, you
also have to pay tax on any “gains” from the purchase.
• With NSO, you’ll have to pay an AMT (Alternative
Minimum Tax). This is equal to ~35% of the gain (the
total FMV of the shares minus the total exercise cost).
• If you sell your stock in the same tax year as you
exercise it, you won’t have to pay an AMT but will have
to pay ordinary income tax (~50%) on the gain.

5. I S O E X A M P L E
• You just hit the 4 year mark and you’ve now vested all of
your 25,000 shares of UnicornInc. They’ve also just
raised an additional $1.5B at a $40B valuation (a
whooping $50 per share)! You’re worth 1.25 million!
• You’re leaving to found your own startup, and want to
exercise your shares. The strike price is $1. You’ll need
$25,000 to exercise your options.
• You’ll owe an AMT of $428,750 next April.
($49 gain per share x 25,000 shares x 35% AMT)

6. Y O U R S O L U T I O N S
• Get a loan from a special fund or a bank.
• Sell stock to exercise option price using a platform.
• Take out a loan from a friend or coworkers.

7. C O M PA R I N G S O L U T I O N S
S P E C I A L F U N D
O R B A N K L O A N
S E L L O N S E C O N D A RY
E X C H A N G E P L AT F O R M
F R I E N D S , FA M I LY,
C O W O R K E R S L O A N
P R O S FA S T
L O W E R Y O U R
O V E R A L L R I S K
G O O D R AT E
C O N S
F U L L R E C O U R S E D E B T,
H I G H C O S T
S TA R T U P S A R E
S AY I N G ‘ N O ’ T O
S T O C K S A L E S .
T I M E C O N S U M I N G
T H E I R M A I N G O A L M A K E M O N E Y
N E W I N V E S T M E N T S
F O R A C C R E D I T E D
I N V E S T O R S
H E L P Y O U
F U N D I N G / PAY M E N T
P R O C E S S
M O N T H LY PAY M E N T S
C O M P L E X L E G A L
PA P E R W O R K , W I R E
T R A N S A C T I O N S ,
C A P I TA L G A I N S TA X
A U T O M AT I C PAY M E N T
( I F Y O U U S E
W E F I N A N C E )

8. W H AT I S W E F I N A N C E ?

9. W E F I N A N C E I S A C R O W D F U N D I N G
P L AT F O R M F O R Y O U R L O A N S
• It’s a loan on your terms. You set the interest and
length. We believe in relationships, not credit scores.
• WeFinance is free for you and your lenders, and
payment and repayment is completely automated.

10. I S O E X A M P L E ( B A N K L O A N )
• You get a loan for $450,000 from the bank at 5%
interest to exercise your options and to pay your AMT.
• Ideal outcome: UnicornInc does their IPO next year.
You sell your shares and pay off your loan.
• Bad outcome: UnicornInc dies. You now hold shares
worth nothing and you have a bank loan to pay off.

11. I S O E X A M P L E ( S E C O N D A RY M A R K E T )
• You go to HR about using SecondMarket or SharePost
to sell some of your shares on the secondary market to
pay for the exercise price and AMT tax.
• Ideal outcome: HR says yes. UnicornInc and you
complete significant paperwork to process transaction.
• Bad outcome: HR says no (following the lead of
Dropbox, Uber, and Airbnb).

12. I S O E X A M P L E ( W E F I N A N C E )
• You decide to crowd fund a loan from your coworkers,
friends, and family.
• Ideal outcome: You crowd fund a flexible loan with
people you know. After the initial setup, the monthly
transactions are automated and headache free.
• Bad outcome: Your campaign fails, in which case you
can still get a bank loan.

14. H O W T O G E T F U N D E D

15. B U T F I R S T O F F…
• These explanations are only useful if your listing is
getting shared beyond your immediate network.
• If you’re reaching out to people who know you well,
some of these might not apply — just explain what the
money is for and why you’re able to pay it back!

16. N E T W O R K
• Reach out to people who might be able to help…
• Do you have friends who know you and have the
cash to help?
• Coworkers/founders you’ve worked with?
• People who are confident about the long-term
potential of the company?

17. B A C K G R O U N D
• Start with your background…
• How long have you worked there? What are you
planning to do after?
• What did you study? Where?
• Why are you trustworthy?

18. E N D O R S E M E N T S
• Ask family, friends, and coworkers for endorsements…
• Why are they reliable?
• Why should you lend them the money?
• Why are they worth the risk?

19. L O A N T E R M S
• Explain your reasoning for the terms…
• Why x% interest?
• Why x months?
• Why the deferral?

20. S H A R I N G
• When you share your listing…
• Present yourself as an investment opportunity. It’s
not a handout — it’s a loan with interest.
• It’s a win-win situation. Why give money to the bank
when you can give it to people you know?
• The more you share, the more likely you will succeed
(and take control of your finances and situation in a
responsible way!).

21. Q U E S T I O N S ?
S E B A S T I A N @ W E F I N A N C E . C O