Why Joe financed his stock options exercise after leaving Confluent with non-recourse funding
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The COVID-19 pandemic hit some companies hard. In August 2020, Confluent downsized its education department and Joe, a technical trainer with stock options, was laid off, which started the 90-day post-termination exercise window on his equity according to standard stock option plan rules.
Joe was not unemployed for long, but in the interim he found himself wrestling with a familiar startup question: how could he afford to exercise his stock options without draining his savings on an illiquid asset? Once he left Confluent, the standard 90‑day post‑termination exercise window kicked in, which meant he had just three months to decide whether to exercise his options or let them expire and return to the company’s option pool.
Joe could have sold investments or tapped his savings to cover the cost of exercising his stock options and the potential tax bill, but that level of personal risk did not feel right while he was still searching for his next role. Instead, he used non-recourse financing from Secfi to fund the exercise, so he could keep his potential upside in Confluent without putting his own assets on the line, and he completed the transaction in time to benefit when the company went public.
When Joe joined Confluent, he did not have much experience with equity. “I do not know very much about finance; in my career, I teach about software and the cloud, so I rely on experts to help me assess my options,” he said.
When Confluent made the offer, they spent real time helping Joe understand his equity, not just the salary number. “When Confluent extended the offer, they walked me through how my stock options worked, what the potential upside could look like if the company did well, and what exercising might cost in strike price and taxes,” he said. “They explained when it might make sense to exercise, including how things like AMT and long-term capital gains could affect my tax bill, so I could make a more informed decision.”
Even when Joe was laid off, the team at Confluent had his back. They reminded him that he had a standard 90-day post-termination window to exercise his stock options, walked him through what it would cost to exercise and cover potential taxes, and encouraged him to explore non-recourse financing so he would not have to risk his personal savings on an illiquid equity position.
Joe knew he had only a 90‑day post‑termination window to exercise his stock options, but coming up with that much cash in such a short period felt overwhelming. He could have exercised on his own, yet doing so would have meant liquidating a large portion of his personal investments to cover both the strike price and potential tax costs. He was reluctant to take that risk, especially since his next career move was still uncertain. “I wasn’t willing to sell those assets when I didn’t know what my next position would be,” he said.
Joe could’ve walked away from his equity, but he felt strongly that keeping his shares could shape not only his own future, but his family’s future as well. “Investing has the ability to create generational wealth,” said Joe. “This wasn’t something I took lightly, especially knowing how much stock options can be worth if a company eventually has a successful exit.”
Joe began looking around for ways to cover both the cost of exercising his stock options and the potential tax bill that could come with it. Secfi emerged as a top contender, especially since some other companies he spoke to had contingencies that made Joe less comfortable. “Secfi took on the risk in exchange for a very small share of the upside,” said Joe, referring to Secfi’s non-recourse financing structure, where repayment only happens if there is a successful liquidity event such as an IPO or acquisition.
When Joe financed his stock option exercise with Secfi, he was not sure what the future held for his Confluent shares, especially with the 90-day post-termination exercise window ticking down. He was relieved that Secfi used non-recourse financing and took on the risk tied to his options. “Letting an investor take a risk for a share of the upside made a lot of sense to me,” he said, reflecting on how it allowed him to preserve cash while still participating in any future liquidity event.
Financing with Secfi allowed Joe to exercise his stock options within the 90‑day post‑termination window without putting his personal assets at risk, since the non‑recourse structure meant Secfi would absorb the downside if Confluent never had a successful exit.
Joe’s bet paid off when Confluent went public not long after he exercised his options. “Having the shares in Confluent has made it possible to do a level of investing I never thought possible,” he said. “I’m now aggressively investing what I’m earning and working with a financial advisor to help diversify my portfolio in a tax-aware way.”
Now that Joe has seen how exercising within his 90‑day post-termination window and using Secfi’s non-recourse financing protected his upside without risking his savings, he’s urging other startup employees to understand their equity, model the tax impact, and explore all their options before letting valuable stock expire.
He recommends that others do their homework and learn about their options. He also says not to wait. “If you’re going to shop around, do so quickly and then make a decision,” he said. “If you wait, you’ll have to wait for the next 409A to come out and then reassess your tax debt, and it is likely to get a lot higher,” he said.
Joe knew that exercising his shares was a huge responsibility. “This is a huge responsibility because if I do it right, it impacts my children and their children, he said. “Financing with Secfi is a no-brainer because you can’t lose.