Yeah I wish YC or someone could provide some anonymized data on this across companies. And it's true that out of all startups, only probably 1% make it big. But the markets are growing fast and just this year there has been ~200 IPO which I think mostly are $1B+.
From a tax perspective, RSU are probably worst. They are taxed on your W-2, effectively a bonus. If you make a lot, you pay max bracket federally and in your state. In California I think it can be ~54%.
Joining seed/pre-seed company that hasn't done a priced round likely is the best. Employees get to buy shares, not options, at the nominal price, often $0.0001 per share. There is no taxes as there is no gain. After a year those turn in to long term shares, and you can hold them forever without paying any taxes. When the company is public, you can borrow money against it so you don't have to sell. If you sell, you pay long term capital gains, and if QSBS still exists and you hold the shares for 5 years, you have $10M tax free federal credit.
With options, it depends on the timing and the cost to exercise. Joining early, and exercising options early, is usually also good since now you own the shares and only had to pay the fair market value which is 20% of the investor valuation. Again now you can hold the shares forever, get QSBS or pay long term capital gains when you eventually sell.
If you join late, likely you should still exercise if you can/want to. If you don't exercise early, then you might have to pay taxes on the gains of the fair market value from the time you were granted the options and the time you exercised. Or you could just hold the options if the company allows. Then after the company is public you can just exercise and sell, and pay the short term capital gains similar to RSU.
I think YC has not put out information like this because the data would show joining a startup as a regular employee is not remotely worth it vs publicly traded companies.
From a tax perspective, RSU are probably worst. They are taxed on your W-2, effectively a bonus. If you make a lot, you pay max bracket federally and in your state. In California I think it can be ~54%.
Joining seed/pre-seed company that hasn't done a priced round likely is the best. Employees get to buy shares, not options, at the nominal price, often $0.0001 per share. There is no taxes as there is no gain. After a year those turn in to long term shares, and you can hold them forever without paying any taxes. When the company is public, you can borrow money against it so you don't have to sell. If you sell, you pay long term capital gains, and if QSBS still exists and you hold the shares for 5 years, you have $10M tax free federal credit.
With options, it depends on the timing and the cost to exercise. Joining early, and exercising options early, is usually also good since now you own the shares and only had to pay the fair market value which is 20% of the investor valuation. Again now you can hold the shares forever, get QSBS or pay long term capital gains when you eventually sell.
If you join late, likely you should still exercise if you can/want to. If you don't exercise early, then you might have to pay taxes on the gains of the fair market value from the time you were granted the options and the time you exercised. Or you could just hold the options if the company allows. Then after the company is public you can just exercise and sell, and pay the short term capital gains similar to RSU.