Okay; I don't know anything about Twilio in particular, but in the usual non-founder startup employee scenario, where you are busting your balls working crazy hours for less than you could get at a real company, you are already assuming a risk in the form of opportunity cost and job insecurity in exchange for equity; you would triple down on this risk by dumping your savings (or borrowings) into illiquid company stock at zero or nearly-zero discount?

How do you know there will ever be a spread? If your startup fails, your shares are worthless. Or better yet, your shares are diluted out of most of their value by several subsequent rounds of private equity, which generally you have no control over whatsoever, but which will certainly go to enrich the founders. Resulting in even more direct transfer of wealth of your investment, to the founders and venture capitalists.

I'm having trouble understanding why any startup employee would do this, as opposed to exercising stock options when they actually have value and ideally some liquidity. Yeah you have to pay taxes, but that's because you came out ahead.

I don't see anything other than a massive gamble. You've already staked enough of your future on one speculative start-up as an employee; why would you then put a big chunk of your own money at risk? An index fund has reliable long-term returns.

In my particular case, I had worked in the telecomm industry before and had a good understanding of the alternatives and felt that I understood where things were going and my prediction - still yet to be proven - was that they would win.

But you are right, it is yet another risk. At Twilio, the pay was awful but I felt the longer term risk/reward was worth it.

If I was with $startup and the strike price was $texas-sized, I wouldn't do it while the shares were still illiquid because executing would be so much.

Still sounds like an all-around terrible deal to me. But best of luck and hope you see some kind of payoff.