Chapter 11Get Your Personal Finances in Order

In late 2021, just as we brought on bankers to begin exploring a potential sale, I sat at my desk staring at a spreadsheet that made my stomach turn. To fully exercise my vested stock options in anticipation for a potential imminent liquidation event, I would have to come up with nearly $200,000 in cash, plus another $150,000 in Alternative Minimum Tax. Over a third of a million dollars—just to own something I had already spent six years building.

The irony wasn’t lost on me. On paper, I was a successful founder with a company that had raised millions, employed dozens, and was in active M&A talks. In reality, I couldn’t afford to buy my own shares. I remember pacing around the kitchen that night, trying to convince myself that taking out a bank loan to cover it was “an investment in my future” and could save potentially millions in taxes as the liquidation of the shares in the transaction becomes long term capital gain as opposed to ordinary income. My wife listened quietly, then asked a single question: “What happens if the deal doesn’t go through?”

That stopped me cold.

I didn’t take the loan. Looking back now, it was one of the smartest decisions I ever made. Even if Polarr had sold for a billion, I wouldn’t have changed that call.

It’s a question every founder or early employee faces at some point: should you spend money to exercise your options?

In the U.S., the tax code makes this question more painful than it needs to be. If you hold your shares for more than a year before selling, you qualify for long-term capital gains rather than ordinary income tax. Sounds great in theory—until you realize the cost of buying those shares, plus the tax on the paper gain, often reaches six or seven figures before you see a single dollar back. And the worst part? Most of those shares never turn into cash.

I get this question all the time from other founders: “Should I borrow money to exercise?” My answer is simple: only if you’re comfortable losing it all.

If you can afford to exercise without jeopardizing your life, your rent, or your family’s savings, go ahead. Think of it like buying a very expensive lottery ticket—low odds, high upside. But if exercising means draining your savings or taking on debt, don’t do it. The truth is, startup equity is illiquid by design, and more often than not, it’s worthless.

I was lucky that I never had to make the decision under pressure. I stayed at Polarr until the exit, so I wasn’t forced to exercise within 90 days like many departing employees are. But I watched plenty of friends take loans or sell assets just to exercise shares in companies that never made it. Some lost years of savings chasing paper gains that never came.

The other rule I lived by—one that probably saved me as much stress as money—was never spend money you don’t have.

The M&A process messes with your sense of reality. You start thinking in terms of potential payouts rather than actual cash flow. One week, your banker hints at life-changing numbers, and the next, you’re back to wondering if the company will survive another quarter. I learned to manage my personal finances as if no deal would ever close.

Charis and I lived modestly during those years. Even though we were married, we rented a two bedroom apartment and had a roommate for years, we budgeted like any middle-class family, and our biggest splurge before the acquisition was the down payment on our house in 2017. Even after the deal closed and the wire finally hit, our only “big” purchase was a used piano for $3,500—for our kids, not us. We’d spent so long assuming there wouldn’t be a payout that when there actually was, we didn’t feel the need to celebrate it with anything extravagant.

That mindset—assuming no liquidity until proven otherwise—kept us sane. It also kept our expectations in check during the months of uncertainty that followed the acquisition.

Because even when a deal finally closes, cash isn’t always cash. Some payouts come in illiquid stock that may take years to vest or sell. Some are structured as earn-outs based on future milestones. And in some cases, there are even clawbacks and potential personal liabilities if a deal goes south.

So as unromantic as it sounds, before you ever start an M&A process, take a hard look at your personal balance sheet. Ask yourself:

1. If the deal never closes, can I still afford my current lifestyle?

2. If it does close, how much of that windfall is actually liquid?

3. Am I borrowing against a future that might never arrive?

Founders like to talk about risk as if it’s heroic, but personal financial risk is different. It doesn’t just affect you—it affects the people you care about the most, those who matter a lot more than your company. While we hear about success stories of those who mortgaged their houses in order to fund their business, we rarely hear about those who lost it all when their business failed.

Now that we’ve covered your own financial foundation, let’s zoom out to the next layer of complexity—your cap table. Because getting your personal finances in order is one thing; aligning the expectations and interests of everyone else who owns a piece of your company is something else entirely.

That’s where we go next.