Act within 90-day window or lose vested equity permanently Negotiate extended exercise periods and reduced restrictions immediately Evaluate company prospects objectively before making investment decisions Only invest amounts you can afford to lose completely Plan equity strategy proactively at your next employment opportunity

Curated by: Rubric Advisors

Equity Compensation

How to Protect Your Equity If You Get Laid Off

This guide explains how terminated tech employees can protect their equity compensation by understanding post-termination exercise windows and available financing options. The article emphasizes the critical 90-day deadline and provides strategies for negotiating extensions and evaluating investment decisions.

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Understanding Post-Termination Equity Impact

All unvested shares are immediately forfeited upon termination from company
Vested unexercised options have limited post-termination exercise window period
Typical exercise window is only 90 days from termination date
Missing expiration deadline means losing all equity value permanently
ISOs become NSOs after 90 days with less favorable tax treatment

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Understanding Post-Termination Equity Impact

All unvested shares are immediately forfeited upon termination from company
Vested unexercised options have limited post-termination exercise window period
Typical exercise window is only 90 days from termination date
Missing expiration deadline means losing all equity value permanently
ISOs become NSOs after 90 days with less favorable tax treatment

Negotiate Extended Exercise Windows

Request extension of exercise window from former employer or manager
Convert ISOs to NSOs for longer exercise periods beyond 90 days
Negotiate removal of restrictions on selling equity or taking loans
Seek 2-10 year windows to delay exercising until ready for risk
Consult experienced attorney for maximum flexibility in equity terms

Evaluate Company Investment Potential

Assess founder credibility and product-market fit before exercising options
Analyze revenue growth rate and customer retention metrics carefully
Compare strike price to current valuation and future projections
Determine if you feel confident or hesitant about company prospects
Consider employee talent quality and product differentiation in market

Determine Your Equity Budget

Calculate total assets minus liabilities and planned major expenses
Maintain 3-6 months emergency fund before investing in equity
Only invest after covering essentials like food, rent, student loans
Remember startup investments remain illiquid until company liquidity events
Budget only what you can afford to lose completely

Explore Financing Options Available

Use existing cash or public investments for simplest exercise method
Consider non-recourse loans covering exercise costs at 20-50% interest rates
Explore secondary sales to funds if plan documents permit transactions
Avoid recourse loans that put personal assets at risk
Review stock option plan restrictions before pursuing any financing

Plan Proactively For Future

Ask about post-termination exercise windows during job interview process
Develop clear equity exercise strategy from day one at company
Write personal memo documenting your equity decision-making rationale
Balance living expenses, risk tolerance, and company confidence levels
Choose employers with employee-friendly equity policies when possible

Key Takeaways

Act within 90-day window or lose vested equity permanently
Negotiate extended exercise periods and reduced restrictions immediately
Evaluate company prospects objectively before making investment decisions
Only invest amounts you can afford to lose completely
Plan equity strategy proactively at your next employment opportunity

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The information above is for educational purposes only and does not constitute investment advice, a recommendation, or a solicitation to buy or sell any security. Any historical figures are for illustration only, and past performance does not guarantee future results. Tax laws, regulations, and contribution limits change frequently, the details here may become outdated. Individual circumstances vary. Consult a qualified financial advisor, CPA, or attorney for guidance specific to your situation. Rubric Advisors is registered with the California DFPI; registration does not imply a certain level of skill or training.

How to Protect Your Equity If You Get Laid Off

Understanding Post-Termination Equity Impact

Negotiate Extended Exercise Windows

Evaluate Company Investment Potential

Determine Your Equity Budget

Explore Financing Options Available

Plan Proactively For Future

Key Takeaways

Understanding Post-Termination Equity Impact

Negotiate Extended Exercise Windows

Evaluate Company Investment Potential

Determine Your Equity Budget

Explore Financing Options Available

Plan Proactively For Future

Key Takeaways

Related Topics

Stock Options 101

Understanding Startup Offers

Early Exercising and 83(b) Elections

How to Protect Your Equity If You Get Laid Off

Understanding Post-Termination Equity Impact

Negotiate Extended Exercise Windows

Evaluate Company Investment Potential

Determine Your Equity Budget

Explore Financing Options Available

Plan Proactively For Future

Key Takeaways

Understanding Post-Termination Equity Impact

Negotiate Extended Exercise Windows

Evaluate Company Investment Potential

Determine Your Equity Budget

Explore Financing Options Available

Plan Proactively For Future

Key Takeaways

Related Topics

Stock Options 101

Understanding Startup Offers

Early Exercising and 83(b) Elections