Employees of venture backed startups are tied to the illiquidity of their stock positions. As timelines to exit have consistently lengthened, employees have begun looking for liquidity alternatives such as secondary market sales to enable them to cash out stock options early and maximize employee stock option value without having to wait for an IPO or M&A exit.
However, selling employee stock options early is not the only alternative, and it may not be the best way to maximize the value of your equity holdings. While selling early provides near-term cash, it forever limits your future upside potential because once the stock is sold, you have no additional upside. It also requires dealing with transfer restrictions that companies place on such transactions. While companies can waive transfer restrictions, the point is that they must be dealt with somehow in a typical sale.
ESO's Program is an Attractive Alternative
By contrast, in a transaction with the Employee Stock Option Fund, you continue to hold title to the stock and retain equity upside should the company have a positive liquidity event. No repayment is due unless and until there is a liquidity event involving the company that issued the shares, such as a sale or IPO.