Optionssvette

Optionssvette is a term used in discussions of startup compensation to describe a hybrid form of equity reward that blends stock options with sweat equity. The concept is not a standardized or widely adopted practice, and the terminology varies by context; proponents view it as a way to recognize significant non-cash contributions alongside traditional option grants.

Mechanics and scope: An optionssvette arrangement typically includes a pool of stock options with a strike price set near fair market value, together with a separate allocation of actual equity or a phantom-equity instrument tied to measurable contributions such as code development, product design, or business development. Vesting is often milestone-based in addition to time-based, with milestones reflecting product milestones, user growth, or revenue targets. Valuation, documentation, and governance requirements are essential to prevent disputes and ensure transparency.

Tax and legal considerations: Tax treatment varies by jurisdiction. In many systems, stock options are taxed on exercise, while sweat-equity components may be taxed at vesting or receipt of the award. Companies must account for dilution, maintain an accurate cap table, and obtain necessary approvals from shareholders or boards where required.

Advantages and criticisms: Optionssvette can help startups conserve cash while rewarding early contributors and aligning incentives. It can also complicate equity structures and raise valuation, governance, and dispute-resolution challenges. Clear criteria for vesting, contribution evaluation, and documentation are crucial to minimize ambiguity.

See also: stock option, sweat equity, vesting, cap table, phantom equity.