A simple slide deck to explain the basics of employee stock options.

3. OUR VISION
A new reading experience that eliminates the distance
between people, and enables the creation of personal
connections and billions of new stories.
Our technology and the power of the crowd will publish,
review, curate and distribute a continual flow of
relevant, quality content for everyone.
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4. Understanding Stock Options
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5. SUPER IMPORTANT
This may be the largest lump sum
of potential wealth you’ll receive!
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6. EMPLOYEE EQUITY
• Employee ownership is an important part of tech
startup culture
• Everyone is a shareholder
• Reinforces that everyone is on the same team,
everyone is sharing the success of the company
• Aligns everyone’s interest – makes you think
and act like a founder of the company
• Stock option is by far the most common form of
employee equity issued in startup companies
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7. WHAT IS STOCK OPTION?
A stock option is the right, but not the
obligation, to buy a fixed number of
shares of stock at a specified price for
a specific period of time.
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8. WHY STOCK OPTION?
• It is all about “tax”
• Unlike stock grant, you don’t have to pay tax
when you receive stock option grant
• Canadian advantage: When you exercise your
options, you can deduct 50 per cent of the
income derived from exercising stock options
(i.e. only half of your gain is subject to tax)
Note: Please consult your accountant for financial advice. I am not an accountant!
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9. HOW DO I KNOW HOW MUCH MY
OPTIONS ARE WORTH?
Current Market Price
– Grant Price e
= Value of Option
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10. HOW DOES IT WORK?
Example:
2012 - $1 grant price
2015 - $13 stock price
2016 - Exercise: $12 gain
Note: numbers here are for illustration purpose
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11. VESTING
• Your options must be vested before you exercise
them
• Vesting usually happens over a four year term
and “cliff vest” the first year (i.e. 25% on one
year grant date anniversary, monthly vesting for
the next 36 months)
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12. EXERCISE
• Two common times when you would likely
exercise
1. When you are preparing to sell the underlying
common stock, mostly likely in connection with a
sale of the company or liquidity event like a
secondary sale opportunity or a public offering
2. When you leave the company
• Three ways to exercise
1. Cashless exercise
2. Sell to cover
3. Cash purchase and hold
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13. FAQ
• What is the difference between preferred stock and
common stock?
• I heard something called 409a assessment. What does
that mean?
• I have no plan to leave the company. Is there a reason
for me to pay cash and convert my options to stock?
• I am planning to work for Wattpad until I retire. Will I be
able to keep my stock options ‘til then?
• This is different than what I learned from Shark Tank.
What should I do? (Answer: Shark Tank is just a TV
show. Live performance is always better!)
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14. IF YOU WANT TO KNOW MORE …
• AVC.com, search for “employee equity”, “stock
options”, etc.
• Feld.com
• Brad Feld’s book “Venture Deals: Be Smarter
Than Your Lawyer And Venture Capitalist”
• Talk to me
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15. IF YOU CAN ONLY REMEMBER ….
• Aligns everyone’s interest – makes
you think and act like a founder of the
company
• This may be the largest lump sum
of potential wealth you’ll receive!
Enrich Lives Through Stories

16. Thank You!
Allen Lau CEO and co-founder
wattpad.com/allenlau
@allenlau
Funded by:
Union Square Ventures
Khosla Ventures
OMERS Ventures
Golden Venture Partners
Version One Ventures
Jerry Yang
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