It's crucial to consider the reputational impact on your company when terminating an employee, especially regarding their ability to exercise stock options and the fairness of the process.

When terminating an employee, communicate clearly and directly without making excuses or apologies.

Cut off access to company systems immediately after termination to protect sensitive information.

Pay all wages and accrued vacation immediately upon termination, as this is a legal requirement.

Effective startup founders handle employee terminations well, which is a hallmark of professionalism.

Companies should evaluate their stock option policies regularly to ensure they are fair and beneficial for both departing and remaining employees. To make stock options meaningful, employees must stay until an exit, have their stock vest, and the company must be worth something; otherwise, owning 10% of nothing is still nothing.

The traditional 90-day exercise period for stock options can be problematic for employees who may not have the funds to exercise their options after leaving a company, leading to unfair situations.

If you have money, you can buy your stock when you leave; if you don't, you lose out, highlighting the importance of financial stability in these situations.

Investors should exercise their pro-rata rights to maintain their ownership percentage during subsequent funding rounds, as early investors can face significant dilution otherwise.