Exercise windows should be longer.

Author: Yoni Rechtman, Partner at Slow Ventures | Date: July 31

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1. Key Themes

Theme 1: The 90-Day Exercise Window Is a Structural Injustice to Startup Employees

The standard 90-day post-departure option exercise window was designed for a startup era that no longer exists — when companies exited in 4–7 years at modest valuations. Today's 10–20 year private hold periods and billion-dollar valuations make the old rules extractive rather than equitable.

"This compensation scheme was based on outdated assumptions, namely that startups get liquidity reasonably quickly (four to seven years instead of 10 to 20) and cheaply (exit values in the tens and hundreds of millions instead of billions)."

"It's super common for someone to do years of good work at a company and ultimately walk away with little or none of their equity, usually because exercising was too expensive and the liquidity prospects too uncertain."

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Theme 2: Equity Compensation Is Being Effectively Clawed Back Through Legal Mechanics

The combination of short exercise windows, cash-only exercise requirements, and AMT exposure means employees are — in practice — paying for their compensation twice (or three times), despite having already accepted lower cash salaries in exchange for equity upside.

"They are often not receiving the equity that they earned but rather paying for it twice, both in the form of deferred/reduced cash compensation and in the actual strike price (three times with AMT)."

"It is unfair to use legal maneuvering to effectively claw back the hard-earned compensation of ex-employees in good standing."

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Theme 3: The Current System Inadvertently Advantages Late-Stage Companies in the Talent Market

Short exercise windows systematically disadvantage early-stage startups competing for talent against larger, more liquid companies — creating a compounding structural moat for incumbents.

"It winds up being a big gift to the biggest, most late-stage companies that can offer their employees liquidity that everyone else doesn't. Just lack liquidity, but rather effectively lack equity compensation at all/in many cases."

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Theme 4: Government-Run Grocery Stores Are Political Theater, Not Effective Policy

NYC's proposed discount grocery stores ("Mamdani-Marts") will structurally lose money by entering the lowest-margin segment of an already thin-margin business, with no economies of scale and no means testing — making them inefficient vehicles for poverty relief compared to direct subsidy expansion.

"The city is going into a low gross margin business, focusing on ONLY the lowest margin products, and believing it (or its contractors) can operate more efficiently with no pricing power or economies of scale relative to incumbents. The proposed 30% discount is more than the entire gross margin of a normal grocery store before even accounting for taking out the high-margin items."

"The city-backed grocery stores will lose a bunch of money on every sale."

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Theme 5: AI as an Architectural Leverage Tool — Not a Replacement for Domain Expertise

Rechtman's anecdote about building a financial model with AI illustrates a signal shift: the highest value use of AI is as an execution layer for expert-designed architecture, not as a substitute for domain knowledge.

"It felt like the closest I'll come to experiencing what a good engineer does with AI: working within a domain of excellence (or at least competence) and using AI to operate at a high level with my architecture and 'design' choices rather than playacting as more sophisticated than I really am."

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2. Contrarian Perspectives

Contrarian 1: Food Is Not Getting More Expensive — It's Getting Dramatically Cheaper (in Aggregate)

The dominant political narrative is that groceries are unaffordable due to corporate greed. The data says the opposite for most households, which undermines the premise of government intervention at scale.

"In real terms, food has gotten MUCH cheaper: in 1960 Americans spent 14% of income on groceries. That's down to 5% today."

The nuance: this improvement has not reached the lowest-income cohort — "the poorest people whose incomes have stagnated and spend 70% of income on food" — but the proposed stores lack any means testing to target that population.

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Contrarian 2: Grocery Prices Aren't Rising Due to Corporate Greed — They're Rising Due to Upstream Supply Shocks

The popular villain narrative (retailer price gouging) doesn't hold when you look at actual margin structures. Grocery gross margins are ~25% and net profits around 2%, with price spikes driven by exogenous shocks, not extraction.

"Groceries are not expensive because of corporate greed. The gross margins across a bunch of big box grocers are ≈25% (profits are more like 2%)... to the extent that grocery prices are expensive/growing in real terms at all, it's because of upstream factors like rising labor costs and production disruptions/supply shocks... Trumprhea, Avian flu, Brazilian coffee drought, etc."

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Contrarian 3: Direct Cash Transfers Beat Institutional Programs for Poverty Relief — But Are Politically Invisible

Rechtman argues that the most efficient poverty intervention — EBT/food stamp supplements — is being passed over precisely because it lacks the political visibility of a brick-and-mortar store, not because it's less effective.

"If the goal is to help the most people most efficiently there is no good argument for this leaky pipe when we could just increase food subsidies through existing channels like EBT supplements... giving people money is too invisible and boring to be a signature policy. So this is what we're getting."

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3. Companies Identified

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4. People Identified

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5. Operating Insights

Insight 1: Structure Exercise Windows to Reward Tenure — Use It as a Retention and Recruiting Tool

Founders can differentiate competitively in the talent market by tying exercise window length to years of service, rather than using the default 90-day cliff that applies universally.

"You can reward loyalty by tying the length of the exercise window to the length/years of service at the company and/or gate the option for cashless based on years of service."

The corollary discipline this requires: faster performance-based terminations, because the generosity of long windows means the cost of a poor equity grant rises.

"The 'get' here is that you should be firing people faster if they're not performing — giving out equity and letting it cliff/vest should be expensive and high consideration."

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Insight 2: Use Long-Form Prompting as an Architectural Practice with AI — Front-Load the Thinking

Rather than iterating with AI through many short turns, writing a detailed 800+ word prompt upfront (goals, style, tab-by-tab architecture, open questions) produces more sophisticated outputs in fewer revisions.

"Rather than going right into it, I wrote an 800+ word prompt with detailed instructions on the goals, style notes, tab by tab architecture, etc., along with some open questions to home in on before building. All told I got a fairly sophisticated build pretty quickly and with far fewer turns of revisions than it would otherwise take."

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Insight 3: The Optimal Equity Package Combines Long Vesting and Long Exercise Windows

These two dimensions are often treated independently; Rechtman argues the ideal structure links them together, and that the current convention of short vesting + short windows emerged from path dependency, not deliberate design.

"The optimal compensation package is a long vesting schedule coupled with a long exercise window. Seems fair!"

"Much like four-year vesting schedules (which are bad and should be longer), these are just conventions that nobody has any real incentive to go against or change up until they really have to."

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6. Overlooked Insights

Overlooked Insight 1: Cashless/Net Exercise May Be as Important as Window Length

Most of the equity compensation reform conversation focuses on the duration of exercise windows, but Rechtman flags that the mechanics of exercise (cash-only vs. net/cashless) are an equally significant — and under-discussed — barrier to employees actually realizing their compensation.

"The lack of cashless exercise means that they are often not receiving the equity that they earned but rather paying for it twice... An obviously better solution would be to move to either much longer exercise windows and/or net/cashless exercise for departing employees in good standing."

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Overlooked Insight 2: High-Margin Grocery Categories Are the Hidden Engine That Makes the Whole Business Work

The public debate about grocery affordability focuses on staples (bread, milk), but those are already loss-leaders. The entire economics of grocery retail runs on fresh departments, hot food, and snacks — which city-run stores won't carry.

"Grocers know you pick based on staples so they drive traffic with staples and drive margins with things like fresh departments, hot food, and snacks (40–60% gross margins) which these stores mostly won't carry."