Your engineer exercises 10,000 ISOs at a $2 strike when the 409A value is $20. That $180,000 spread never hits their regular tax return, assuming they hold past the qualifying period. But the IRS runs a parallel calculation on Form 6251 called the Alternative Minimum Tax, and your employee owes whichever is higher.

On a $150,000 salary, regular federal tax is roughly $25,000. Add the $180,000 ISO spread for AMT purposes, apply the 26% rate after subtracting the exemption (~$88,100 for single filers in 2025), and the tentative minimum tax climbs past $60,000. The gap can reach $35,000–$40,000, due in April, on shares they have not sold.

A credit mechanism (Form 8801) recovers some of this in future years when regular tax exceeds AMT, which often happens after shares are sold. But that recovery can take years, and the cash gap is real.

If your team is exercising ISOs, the AMT math should be part of the conversation before they sign the exercise notice, not after.

Earlyasset emerged from stealth last week with $2M in pre-seed funding to build transaction infrastructure for venture secondaries — pricing, execution, and capital for the thousands of private companies currently locked out of secondary markets.

The backdrop matters more than the raise. Venture-backed companies now stay private for ~14 years on average, up from six years in 2000. An estimated $4 trillion in private company value sits across the ecosystem, and more than 80% of secondary transaction volume is concentrated in just ten companies. Everyone else has no practical path to liquidity.

For founders, this is a cap table operations problem. Every secondary sale triggers ROFR clauses, requires board approval, needs a defensible price, and creates transfer paperwork. The operational burden falls on you, and it only grows as employees who can't exit become flight risks and early investors stuck on your cap table complicate later rounds.

Goldman acquiring Industry Ventures and Morgan Stanley acquiring EquityZen in 2025 signals this market is maturing fast. If you haven't thought about your secondary policy yet, your next fundraise might force you to.

Sources: WSJ, GlobeNewswire