When I joined Yahoo In 2008, I received a small number of options. I don’t remember how many–it was very few–but I do know my strike price was roughly $16. I don’t remember that because my strike price was particularly lucrative, but rather because some of my coworkers would complain about their underwater strike prices in the $50s. Given the stock was trading at roughly $18, it was easy to understand why the folks on my team were a bit perturbed. As best I can tell, those options held by my coworkers remained out of the money until they expired.
I was thinking about Yahoo recently during a few discussions with folks who expected their company to reprice their options given the economic turmoil of 2022.
The answer to “when will your company reprice your options" is almost always, “never” but it’s a natural topic in an environment where a company like Klarna has dropped from a $45B valuation last year to raising their next round at $6.5B.
Option repricing remains an exceptionally rare occurrence. It does happen: Google repriced in 2009 after falling from $747 to $308, and Zenefits repriced in 2016 after changing CEOs and losing half their value. Even in those cases, it’s not necessarily a great employee outcome. Employees’ vesting schedules typically get reset. Those three years of vesting you’ve already completed? They never happened.
Option repricing is just one of the many discussions I haven’t had in nearly a decade that is now popping up with 2022’s downturn, and I’ve been trying to pull together my career advice for folks navigating their first downturn. My career advice for the current downturn:
- There’s some disagreement on whether we’re in a recession. If we are in a recession, then there’s also disagreement on when the recession started. That said, the average recession lasts 15 months, so a conservative plan would be thinking about the downturn lasting through the end of 2023 – how should you use that stretch of time?
- If any given role can prioritize profit, pace, learning, prestige or people, then this is a good time to be focused on working with good people in a role where you’re learning. There’s a lot to learn right now as many companies are abruptly shifting from long-term growth-oriented goals to short-term, profitability orientation
- It’s a rough time to prioritize profit, because much of tech compensation is grounded in equity valuations. The prevailing wisdom has been that FAANG companies are the easy path to outsized compensation, but Netflix has dropped from $691 to $179 in the past 8 months, and Google has dropped from $2,965 to $2,181. Private companies are even harder to evaluate right now, ranging from the earlier Klarna valuation shift to the numerous recent layoffs (further, layoffs may not correlate with lower valuations, as valuations have shifted from anchoring on growth to anchoring on profitability). While you may know the financial challenges at your current company, it’s pretty hard to get a sense of whether other opportunities are healthier financially
- Similarly, it’s a tricky time to chase prestige as many companies that were prestigious a year ago like Netflix are in an awkward place or going through a hiring freeze like Meta. Although FAANG will remain prestigious, the most prestigious companies of 2025 are far less obvious than they were twelve months ago
- Combining the last few points: my general advice to folks would be to stay where you are as long as you’re reasonably happy day to day and feel like you’re learning at a good rate. Even if your effective compensation has declined a bit, it’s very hard to determine if the compensation at any other company will hold up either. Don’t get me wrong, if you’re unhappy for non-compensation reasons, then of course you should find another role. Well, unless you’re unhappy because the company is more focused on short-term profitability, because pretty much anywhere you go right now will have that orientation. Referring back to the first point, this isn’t the new normal, just a difficult ~15 month period to navigate
- Folks will reasonably disagree with this, and I agree it’s an inequitable practice, but I have personally seen friends get filtered out of senior and executive opportunities for having “too many” short stints in their resume. Voluntarily moving roles right now increases your risk of joining a company shortly before your role is eliminated (or otherwise becomes problematic), creating a risk of multiple short-term stints. You can absolutely explain those stints, and a reasonable interviewer won’t penalize you, but my lived experience is that landing a senior role requires passing multiple somewhat arbitrary process gates. It’s valuable to minimize the number of process gates that hinder your progress, which in this case means reducing risk of short stints in roles by preferring role stability in this downturn
- If you do decide to join a new company, then do your due diligence on financials. If you’re an engineer, this is finding a backchannel into engineers at the company to understand the situation. If you’re an executive or senior leader, this is asking for the company’s P&L statement and someone on the finance team to walk you through it. With the P&L statement, your goal is to understand how revenue is growing, how costs are growing, the relationship between revenue and costs, and the remaining cash in the bank. Even with the caveat that startup P&Ls almost always contain some factural errors, it will give you a good sense of directionally how things are going. Setting expectations a bit: it’s quite normal for executives to get this sort of visibility into startups they’re in late stages of interviewing with, but I’ve never seen non-executives get this sort of access. (Of course, if you’re interviewing at a public company then you can learn all this stuff yourself even if you’re not interviewing there.)
- Only spend money exercising options if you can financially weather the options becoming worthless. My experience is that most of the folks chiding you for not early exercising your options, or leaving a company without exercising your options, are significantly wealthier than you are. They’re giving you advice from their situation, not yours. I knew someone at Digg who exercised their options at great personal expense and then spent years on a repayment plan to the IRS as those options became worthless. It’s ok to take risk, I know many folks glad they exercised their equity, but in a downturn it’s especially important to only play games you can afford to lose
If you find my following perspective to be overly conservative, I’d gently push back with the observation that most folks I know in or pursuing executive roles view my career decisions as moderately risk-seeking. The same holds true for folks who are financially supporting their families or on an employer-issued visa. If none of those conditions apply to you, then adjust to your preference.
I’ll end with some advice to remember next year as the downturn ends and the upswing begins. The personal freedom to ignore downturns comes from financial stability, and the best path to financial stability is taking money off the table whenever you can until you’ve reached financial independence. A lot of financial advice out there is written from the perspective of very wealthy folks. If you’re already wealthy, your goal is to maximize the risk-adjusted expected return of endeavors, often by taking meaningful risk. For example, if you’re wealthy, it’s almost always the right decision to early exercise your equity. If you have millions of dollars, then it’s reasonable to risk $100k now for the potential of millions in reduced tax in six years. That’s not necessarily true when you’re not already wealthy.
Personally, I’ve never regretted selling early, exercising late, or not exercising at all. In tech, you’ll often tangentially know folks who appear to have effortlessly struck it rich, but the vast majority of folks you know are not in that situation (including many who appear to be in that situation!), and it’s much more reliable to get wealthy a bit at a time than all at once.