Sourcegraph options and equity compensation FAQ

Sourcegraph options

Sourcegraph currently only provides equity to teammates in the form of options.

By default, all option grants vest monthly over four years with a 1-year cliff. This means that 25% of your grant will vest on the 1-year anniversary of the vesting start date, and the remaining 75% vest in equal (1/48th of the total) amounts on a monthly basis.

US employees receive incentive stock options (ISOs) to the maximum degree possible, while all other teammates receive non-qualified (or non-statutory) stock options (NSOs). The reason is that ISOs are a creation of the US tax system and available only to employees.

All option holders have the right to early exercise their options in Carta. This gives you the ability to pay to exercise options before they have vested, which can provide certain tax benefits in certain locations. Speak to your own financial and/or tax advisors to understand the implications.

Speak to your own advisor

Sourcegraph cannot make recommendations or provide advice related to your option grants. Please speak to your own financial and/or tax advisors!

FAQ

What if my options in Carta are incorrect (such as I have the wrong number of options or the wrong type of options)?

Email our Carta admin and cc your legal POC or [email protected], depending on the sensitivity of your question.

Is there any weird tax stuff for [me|non-US teammates|contractors|part-time teammates|etc.]?

Unfortunately, we cannot legally provide personal financial or tax advice. Please speak to your own tax advisor.

Are there any non-standard liquidity preferences (anything greater than 1x) on the preferred shares?

Unfortunately, we cannot answer this question publicly due to confidentiality provisions in our fundraising agreements. Sourcegraph teammates, however, can find the answer at https://docs.google.com/document/d/1TFBjXM6d3d0Pa90MrcHbRl-PV53f2tBdwm8fh0nsEvs.

How much time do I have to exercise the stock options that have vested if I leave?

All teammates who join us after May 2021 will have ten (10) years from the date of grant to exercise vested options.

For teammates who joined us May 2021 or earlier:

  • NSOs: ten (10) years from the date of grant to exercise vested NSOs
  • ISOs: three (3) months after leaving to exercise vested ISOs, which Sourcegraph at its discretion may extend on a case-by-case basis.

So, exactly how valuable are my options today?

Since Sourcegraph’s stock isn’t actively or publicly traded, there is unfortunately no way to know what they are worth “today”. It is possible to use the latest fundraising valuation to calculate what they could have been worth if you had exercised them and could have sold them in a past fundraising round. We provide this calculation when presenting offers.

However, that is a flawed view. Because our stock can’t be sold today, we have to make predictions about what it could be worth in the future. This is why we present a range of outcomes in offer presentations instead of just using the latest value (but of course, even using scenarios is imprecise, due to unknowns like future dilution and tax rates).

Importantly, because Sourcegraph is a growing startup, looking at the latest value in our offer presentation leaves out a lot of important nuance. You could go work at a larger, more established company, and get an equity grant worth more “today”, but the upside may be lower (and of course the downside may also be lesser). Volatility, or the expectation of change in the future, is fundamentally valuable when it comes to options.

So while it’s easy to plug our recent numbers into one of several calculators, it’s just not that simple. We believe that a view of different future scenarios like we provide in offer letters is the best way to communicate a range of outcomes. The People Ops team can provide this calculation for you if you are ever interested.

How are option grants calculated for new hires?

See our compensation bands overview to understand how option grants for new hires are calculated.

How are option grants calculated for promotions?

As a company grows in size, the value of each share (and option) grows, which means that the number of shares granted will decline over time.

This means that simply joining the company earlier can result in someone having more options than the latest bands would suggest. And if they are promoted, they could already have more options than the new, theoretically higher band would reflect.

In such cases, teammates are not intended to be punished for joining earlier. If necessary, they will generally receive an additional number of options that matches the increase between their previous and new levels in the latest bands. Some variation can exist in certain situations.

As an example of how this could work in practice, imagine a teammate already has 1,000 options. The company’s bands have evolved since that initial grant, and they are later promoted from their current level, which has a new target of 300 options, to a higher level that has a target of 425 options. For their promotion, this individual would receive +125 options (the difference between 425 and 300) to get them to 1,125 total.

Does it matter when I choose to exercise my options?

Timing your exercises can have tax implications or benefits.

Unfortunately, we cannot provide personal financial or tax advice. Please speak to your own tax advisor.

If I early exercise my options, should I file an 83(b) election?

If you are a US taxpayer, you must download your 83(b) elections from Carta and file them with the IRS within thirty (30) days of the date of your early exercise if you want to avoid owing additional taxes on any subsequent gains in the value of your options upon vesting.

To receive a stamped copy of your 83(b) form for your records, below is a template letter you can mail to the IRS along with two signed copies of your 83(b) forms and a postage-paid return envelope.

{Date}

Department of the Treasury

{Address provided in Carta 83(b) instructions}

To whom it may concern:

I’ve enclosed two copies of my 83(b) election in connection with my early exercise of Sourcegraph, Inc. common stock. I would like to receive a date-stamped copy, which you can send me using the enclosed postage-paid return envelope.

{Your name}

You can find more information about 83(b) elections here.

What percentage of the company does each share represent, including common stock, restricted stock, outstanding options, etc.?

We do not share this number publicly, but Sourcegraph teammates can find the current count of fully-diluted shares outstanding at https://docs.google.com/document/d/1TFBjXM6d3d0Pa90MrcHbRl-PV53f2tBdwm8fh0nsEvs.

Every time we raise money from investors, this total amount increases (and it can increase for a variety of other reasons as well, such as increasing the number of options that can be granted), so there is no guarantee that it will stay the same, and there is no limit on the number of shares that could come into play.

Who should I go to if I have questions?

For now, Dan can help answer any questions about your options. The entire People Ops team is available to provide support as well.