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You started a business and you want to compensate your early employees. Or youve joined a startup and were offered stock options as part of your compensation. How do those work? Lets do it. Most startups in the US compensate their employees with a salary, of course, and with stock options. The idea here is giving team members an upside if the collaborate to increase the company valuation. On public companies, that is, companies whose stock has been listed on a public stock exchange, this works somewhat differently, so I wont get into that. Ive never worked for one of those companies, so I dont really know. This video is mostly about private companies: startups where the stock is owned by the founders and their select investors. It all starts with a stock option pool. This is a pool of shares that the company issues, and that it reserves for employees. On paper, this is a legal document signed and approved by the Board of Directors, and it represents a new issue of company share
