One of the benefits of working in startups is that you have a chance to become an owner in the startup you join and enjoy the upside of the work you actually implement. This real ownership is a rare opportunity in Southeast Asia as most of the time owners keep shares to themselves.
I believe in following the golden rule – do to others what you would have them do for you. So Xendit has been giving out meaningful stock options (ask our early employees) since the very beginning in a fairly generous way. When few startups in Southeast Asia were giving meaningful stock options, we were looking to make sure our employees were looked after – even if people were new or didn’t understand stock options.
At Xendit, we believe that everyone should literally own part of Xendit. There are 2 useful effects:
- We expect that owning shares means you act like an owner, when things break at 3am, you’re awake helping to fix because it affects you and me both
- If you have contributed to the org, we want you to share in the upside of your work. Stock options are some of the best ways to make sure you share in our upside (should you choose)
Most of the biggest names produced by Silicon Valley have stock option plans that they gave out to lots of employees early on. Those that converted to shares were in these cases, able to access significant upside.
Stock options are an option to buy stock at a certain price within some fixed period of time
|Options are:||which means|
|The right (but not obligation) to buy stock||you can choose to buy the stock but don’t have to, literally an option|
|At some predetermined price||we set the price at the agreed date without knowing what will happen to the price of the stock|
|Within a fixed period of time||there is a time window where the option is valid|
This stock option structure is so widely used because it provides you with a lot of upside without needing you to fork out the funds to actually buy the stock today.
For example, if a stock option has the exercise price of $1, it means you can buy the stock for $1 even if the stock is worth $15 in the market. In this example, you would capture $14 in instant profit. As a counter example, if the stock is only worth $0.5 today, then you wouldn’t buy at $1 which means you don’t need to outlay any funds to capture the upside of the option. The option return chart looks something like this:
At Xendit, stock options are 4 year vested with a 1 year cliff, monthly vesting thereafter
|Xendit Terms||which means|
|“4 year vest”||you earn all the stock options you’ve been quoted over a period of 4 years. The intent of a 4 year vesting period is to incentivise you to stay for a long time, e.g. 4 years|
|“1 year cliff”||if for whatever reason you leave the company within 1 year, you are not entitled to any stock options. This is intended to make sure there is a good fit (which we assume we can both tell within 1 year)|
|“monthly vesting”||“monthly vesting” means that after the first year, each month you stay you get 1/48 of the total stock options being offered|
So let’s take an example: let’s assume you are given 48,000 stock options over 4 years. After 1 year with the company, you would get 25% of the stock options, i.e. 12,000. Each month thereafter, you would get 1/48 or 48,000 stock options, i.e. 1,000 stock options monthly.
Generally, if you’ve been at Xendit < 2 years, then once you leave, you have 3 months from the date of your departure to exercise your stock options. If you’ve been at Xendit > 2 years, you have 10 years from the grant date of your option to choose if you would like to exercise your stock options. This is longer than most Silicon Valley companies because we recognise it’s not always easy to save enough to be able to exercise your options. So we figured we’d follow our golden rule “Do to others as you would like them to do to you”. So we extended our time period for exercising stock options
You should choose options to share in the upside
I encourage you to seriously consider stock options (I have them too). You get to literally own part of the business, share in the upside (with downside protection) and put some skin in the game. We’ve had folks who have chosen against stock options for a long time and I suspect they wished they had chosen to have some of their salary in stock options. The upside has been very real for those of us who have opted for stock options and we really get to share in the ownership of this ship we’re building together.