If you work at a startup, a big slice of your net worth is probably tied to one company - your salary comes from it, and so does most of your potential upside. This edition is about a specific, often-overlooked decision: how you pay to exercise your options, and why writing that check from your own savings can quietly make your concentration problem worse.
The short answer: Concentration risk is when a single asset makes up so much of your net worth that its ups and downs drive your entire financial future. For startup employees, that asset is usually your own company's stock. And here's the part most people miss: when you exercise vested options with cash, you're often moving a large sum - sometimes six figures - out of your diversified savings and into an illiquid, single-company position.
You're not reducing concentration. You're doubling down on it.
Say you decide to exercise. The standard move is to pay it yourself - strike price plus taxes, straight out of your savings. And the moment that money moves, three things happen at once:
Your savings shrink
Cash that could have spread across index funds, bonds, or your emergency fund is now parked in one private stock.
Your concentration climbs
Even more of your net worth rides on a single company - one you can't easily sell when you need to.
Your flexibility drops
That money is locked in an illiquid asset until a liquidity event that could be years away, if it comes at all.
If you still work at the company, this stacks on top of a paycheck that already rides on it. Either way, you've doubled down: more money in one stock, less spread anywhere else, and no easy way out.
There's no universal number, but here's a mental model planners use. Think in three zones:
1. Comfortable (under ~10%): A single stock at this level is a normal part of a diversified picture. Little action needed.
2.Worth a plan (~10–30%): Where most pre-IPO employees land. Not an emergency, but it deserves an intentional strategy and a timeline.
3.Dominant risk (above ~30%): One company is now steering your financial life. Funding an exercise with your own cash pushes you further into this zone.
The reframe: own the upside without spending your savings
Here's the move more employees should consider. You can separate the decision to own your shares from the decision to fund the exercise out of pocket. One path is non-recourse financing: the cost of exercising - strike price plus the associated taxes - gets funded for you, so it never comes out of your own savings. In exchange, the funder receives a portion of the proceeds if your company has a successful exit; if it doesn't, you owe nothing back.
("Non-recourse" means it isn't a loan against you personally - no monthly payments, and no personal liability if the stock ends up worthless.)Now look at what that frees up. The cash you would have spent exercising stays in your pocket, and you can invest it across a diversified portfolio instead of sinking it into one illiquid private stock. The net effect:
You keep exposure to your company's upside
you still own (or stand to own) the shares.
You can build diversification with your own money
the savings you didn't spend can go into a broad mix of assets.
You limit a specific downside
with non-recourse funding, a bad outcome doesn't cost you the cash you put at risk by exercising yourself.
The honest trade-off: this isn't free. In exchange for fronting the cost and taking the downside risk, the investor shares in your upside - so if the company soars, you keep less than if you'd funded it entirely yourself. It's a way to manage concentration and preserve liquidity, not a way to maximize a best-case return. Whether that trade is worth it depends on your savings, your conviction, and how much single-company risk you can stomach.
1. Map your concentration. Add up what you'd be putting into company stock (exercise cost + taxes) and compare it to your total net worth. Which zone does it land you in?
2. Know your real numbers. Vested vs. unvested, ISO vs. NSO, strike price, expiration, and any post-termination window. The tax bill is often the bigger surprise than the strike price.
3. Decide the two questions separately. First: do you want to own these shares? Second: should that come from your savings, financing, or a mix?
4.If you fund it yourself, size it deliberately. Exercise an amount that keeps your concentration in a zone you're comfortable with - you don't have to do it all at once.
5.Talk to a professional. A tax advisor can model AMT and timing; a financial advisor can pressure-test how a six-figure illiquid position fits your goals.
If cost is the only thing standing between you and a smarter concentration decision, Equitybee is one option employees use to fund exercise costs and taxes through a non-recourse structure - letting you keep your own cash free to diversify. To date, Equitybee has facilitated $317M+ in total volume across 890+ portfolio companies and helped create 2,800+ new shareholders. Learn more at equitybee.com/employees
Equitybee does not provide tax or financial advice. Always consult a qualified professional about your specific situation. Investments in private companies are illiquid, speculative, and involve a high degree of risk, including the possible loss of the entire investment; past performance is not indicative of future results. Funding is not guaranteed. Platform figures are as of March 2026.Securities are offered by Equitybee Securities LLC. Equitybee Securities is a member FINRA.