- cash bonus

- RSUs

- More OTE Options

You got to pick two and your ratio. IIRC, 80/20, 60/40, 50/50.

If that wasn't the case then yes, there would be no reason to take options as comp because obviously (as you say) you can just buy NFLX on the stock market directly with some or all of your cash.

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Netflix offers you stock options that themselves are worth $100, based on various input factors like fair market value of NFLX, interest rates, volatility, dividend yield, etc). Now let's say the strike price of those options is $900. You decided you want all of your $300k/y comp in the form of these options (which are valued each at $100), so you end up with the option to buy 3000 NFLX shares at a later date.

Netflix has a great year (partially thanks to you!) and now NFLX is trading at $1200. You exercise all of your options, buying 3000 for $900 each and immediately selling them for $1200. Net profit: $900,000.

If you'd taken the cash you'd have $300,000.

If you'd taken the cash and immediately invested all of it in NFLX, you'd have $400,000.

But you can take the cash and immediately invest it all in NFLX options. That should be the baseline for comparison, when answering "why would one pick options vs cash"?

I'd imagine you _must_ have some benefits to pick options. Perhaps tax treatment is better; perhaps you pay less fees than buying them yourself. But still, there must be some incentive to pick NFLX options from the company, instead of picking whatever options you want from your broker.

(also, the flip side to your example: if NFLX drops 1% because of market conditions outside of your control, and the options are close to expiration, you now don't have $297000 .... you now have $0).

> (also, the flip side to your example: if NFLX drops 1% because of market conditions outside of your control, and the options are close to expiration, you now don't have $297000 .... you now have $0).

Yes indeed, that is why options are a risky investment and no company pays people entirely in options.

Another benefit of the company's options is that they have a 10 year term, vs most market options which expire in < 1 year. You can get LEAPS but those are still max 2-3 years.

Meaning, if the company's stock went up 2x after year 1, your salary has effectively doubled for years 2-4. If the stock went down -50% however, you just leave and get market salary somewhere else.

So, considering this, the expected value of $100 in stock options is actually more than $100.

If you get 25k shares worth <$1.00 and, you won't double your salary even if the share price doubles. Not to mention that only 1/4 would be able to be exercised, and you have no liquidity to realize the gain.

Investors that put money in get preferred shares right?

The tradeoff is not equal: taking less salary and receiving stock of less value seems risky to me. I can't imagine the employees discount is very good (those preferred shareholders don't want to be diluted).

isn't the idea that you buy shares at book value, which is way less than "last round valuation"? so you're getting a discount.

I mean, hopefully that's how it works, I never put enough money when exercising my option to care...

in my experience, most startups do offer you a sliding scale of cash vs equity, just not 90% as NFLX does. they may not advertise it or be upfront about it, but i've never personally experienced a startup that wouldn't trade one for the other.