Best thing to do: forget about them. If and when the time comes, you'll know what to do. Glance at when they expire, mark it on your calendar, and when you're within a year or so of that date, if you're still in business, consider it. More often than not, they'll be worth little to nothing (especially once you factor in any taxes that come along with them). Don't waste time or energy trying to figure out how much they're worth, because it'll change a thousand times before you actually do anything with them.
> Best thing to do: forget about them. If and when the time comes, you'll know what to do.
That is terrible advice.
If you work at a startup then compensation will be a mixture of salary and equity. You should know your worth and negotiate your number when joining a startup. You should understand the details of the last financing: how much was raised? who were the investors? how long is the runway? what were the high-level economic terms of the deal?
You should ask around to see what is fair market terms for the options you should receive. You should do a search on angel.co/jobs and look at comparables.
Read Venture Deals by Brad Feld and Jason Mendelson even if you are not a founder. Founders and investors know this stuff. If you are naive going into your employment you may end up being screwed out of upside.
Sure, use it as part of your negotiation up-front, keeping in mind that 2% of $0 is still $0. If things go incredibly well, with a ton of luck, maybe you'll get something. Maybe it's part of your compensation, but it's a pretty useless part: you can't spend it for many years (usually at least 4, assuming you can sell after they all vest), and it's not guaranteed. You get the percentage of the scraps--after the VCs have taken their cut, and the founders have taken theirs. Call it compensation if you want, and certainly it's good to have some skin in the game, but there's no good reason to really follow it that closely after you've signed on with the company.
Once they're in your employment contract, forget them. Stick them in a file cabinet someplace marked +4 years and see where things go. In that time, there will (probably) be more rounds of funding, which will dilute your shares. Things will change: valuations, personnel, perhaps executives. Don't waste time re-calculating your options all the time, it's an exercise in futility.
If there's one thing I've learned from hard experience, it's "Put not your faith in stock options." I was granted them twice, and in neither instance did I actually see a dime from them. (In the first case, it was right in the middle of the Bubble, and by the time I left, they were so far underwater as to require a ROV to find. In the second case, I was laid off six months after joining the company...and on the Thursday before 9/11. Talk about lousy timing.)
That's a fair point, but I think it's more dangerous to look at them as anything more than a lottery ticket. Since startups are more likely to fail than to succeed (no matter how hard you work), don't set yourself up to be disappointed. It's great to be excited that on paper you could be worth $10m, but when you get acquired and the money you thought you had is suddenly worth only $50k and after windfall taxes you walk away with $30k, it can be disappointing. Especially if you take that $30k and divide it over, say, 4 years -- $7500/yr. You probably gave up more than that in salary.
Anyways, I guess my point is not to view the stock as being worth anything--it's too easy to get attached to the "paper value" (or even potential value) of the stock. Focus on the learning & networking aspects of the job, not the payouts.
