Why AI Employees Need to Rethink Their Equity Comp Strategy

If you work at an AI-focused pre-IPO company, in 2025 a new exit pattern has been emerging that may change how you should approach your equity compensation. It has a few names, but let's call it a "reverse acquihire." Based on the deals we've seen in 2025, it's creating different outcomes for different stakeholders than traditional startup exits.

The key takeaway: there is a lot of discussion that this reverse acquihire playbook may become somewhat common. If it persists, it likely has two major impacts on employee equity comp strategy: (1) buying your equity becomes relatively less attractive, and (2) the value/need for a Post-Termination Exercise Periods (PTEPs) becomes much more attractive.

The Reverse Acquihire Pattern

In traditional startup acquisitions, a buyer purchases the entire company and all shareholders receive proceeds proportionally (subject to VC preference). But in several recent AI deals, Big Tech companies have taken a different approach: hiring away founders and key technical talent, potentially licensing the startup's technology for substantial fees (often billions of dollars), and mostly leaving the majority of employees at the startup behind (which continues operating under new leadership with varying outcomes for remaining employees).

Bloomberg counted at least six major deals using this approach in 2024 and 2025, amounting to more than $8 billion. Key examples:

Meta + Scale AI ($14.3B): Meta acquired a 49% stake, valuing Scale AI at $29B. Founder Alexandr Wang and a small number of employees joined Meta. When the deal was announced it was unclear if employees that remained would get anything. Eventually, Scale AI announced it would distribute dividend proceeds to vested equity recipients and shareholders-- but the details are unknown.

Google + Windsurf ($2.4B): Google hired CEO Varun Mohan, co-founder Douglas Chen, and about 40 employees. According to sources cited by TechCrunch, the $2.4B was split roughly evenly between investors ($1.2B) and compensation for hired employees ($1.2B, with substantial portions to founders). Employees hired within the last year reportedly didn't receive payouts, and some who joined Google had vesting timelines reset. The remaining ~200 employees were later acquired by Cognition for an estimated $250M.

Other major deals: Microsoft + Inflection AI ($650M; early investors got 1.5x, later investors 1.1x); Google + Character.ai ($2.7B; company restructured as employee co-operative); Amazon + Adept (investors broke even; company continues with approximately one-third of original workforce); Amazon + Covariant (~$400M; 25% of employees hired). Exact details have not been publicly disclosed for the payouts for average employees.

What These Deals May Mean for Employee Equity

Based on publicly available information and reported sources, we can observe some patterns:

Founders and key technical talent: Typically receive substantial compensation packages, often including portions of licensing fees.

VCs and early investors: Returns have ranged from breaking even (1.1x) to modest multiples (1.5x-4x in documented cases).

Average employees: Outcomes have tended to be significantly less favorable; possibly even negative (if value of equity they bought is wiped out; and/or job loss occurs):

• AI companies biased to equity comp, which in many cases lost most/all value

• Some employees received no payouts; others had vesting timelines reset by the acquiring company

• And even in more positive deals where a liquidity payout did occur, it was frequently substantially less than if a traditional acquisition would have occurred

• Last, for those left behind, layoffs are a large risk, and the company’s valuation dropped significantly most times.

The key concern: In traditional acquisitions or IPOs, exit outcomes are generally proportional for all shareholders. These reverse acquihire deals create scenarios where a select few individuals take the lions share of the value/payout and leave many others behind.

How This May Impact Your Exercise Strategy

The value and benefit of exercising/buying your equity is reduced. Exercising options has traditionally been a tax optimization strategy for employees, and a possible requirement if leaving the company. And you did it by evaluating the company's business prospects and making an investment decision.

Investing in your own company was always high risk; but its gotten much higher now. Before, the assumption was that if the company did really well, the value of your equity would increase and you'd get a solid ROI. Now, things are murkier. You still have the very large risk of company failure and/or an unsuccessful exit. But now--even if things go well with the company--a reverse acquihire deal could make your shares worth less...or $0.

A Key Protection to Consider: Post-Termination Exercise Periods (PTEPs)

Given these emerging patterns where buying your shares has higher risk (and thus a lower estimated ROI) -- what do you do if you leave the company (voluntarily or involuntarily)? The typical 90 days to exercise options or they expire worthless is a really tough situation.

A possible solution: negotiate for an extended Post-Termination Exercise Period (PTEP) on your stock options.

What is a PTEP: When you leave a company, you most commonly have just 90 days to exercise your vested stock options or they expire (and become worthless). A PTEP extends this window—typically to 2-7 years—giving you significantly more time and better information to make the exercise decision.

Why PTEPs matter in this environment: If you work at a startup, a sizeable amount of your compensation is equity. With you taking less cash in favor or equity and reverse aquihires making the value of equity more at risk -- you can get kinda screwed if you leave the company and have a forced decision to (1) pay money to buy your vested options (take on a ton of risk), or (2) let them expire worthless (losing all the value you vested into).

A PTEP eliminates the rock-and-hard-place scenario by giving you a lot more time until the option expires. You can assess whether the company achieves a traditional exit benefiting all shareholders, a reverse acquihire with potentially unclear employee outcomes, or simply fails to achieve meaningful success—and you only exercise when you have clarity that the outcome will reward you.

How to Negotiate for PTEPs

There is a lot of strategy here. But at a very high level, when negotiating PTEPs, we've seen the most success when it is framed as a (1) a desire to ensure you can realize the value of your equity given you take below-market cash compensation to work at a startup, and/or (2) noting a desire for a PTEP as a protection against current market dynamics like reverse acquihires.

Key terms to know:

• Extension period: 3-5 years is reasonable; 7-10 years is ideal but may face more resistance

• Applies to: All vested options at time of departure (voluntary or involuntary)

• Limitations: Standard provisions for company dissolution, IPO, or acquisition events still apply

• Exercise mechanics: Maintain same strike price and tax treatment as if exercised during employment

The Bottom Line

The reverse acquihire pattern may represent a significant shift in how AI companies exit and distribute value. PTEPs cost companies (mostly) nothing yet give you time and flexibility to make informed equity decisions rather than forced choices.

I can 100% guarantee that not every company is going to offer or agree to PTEPs for employees.

But understanding these market patterns and potentially adjusting your equity strategy is absolutely something you want to be focused on.