Employee stock options are issued for what the stock of the company was worth then, with the hope that it will be much higher when the company goes public or is acquired by a bigger player. It is not unusual for early employees to get stock options for say 10 cents per share and then after the company IPO sell their shares for $20 per share. They accept these stock options in return for a low initial salary to conserve company cash. And yes, they get those option grants for free, and don't pay their low share price until they exercise them.
As to VCs, yes they do give more than just money to the company. They help with business advise and the connections they have. If they make a sizable investment they usually also insist on getting one or more seats on the board of directors. Here is more on the growth of Yahoo and Google:
http://en.wikipedia.org/wiki/History_of_...
http://www.siliconvalleyhistorical.org/#...
https://www.google.com/about/company/his...
Hi there. I will like to make query with reference to Yahoo start up. You might wish to elaborate with any other start up that turned major corporations such as ebay, google instead. i picked Yahoo because the 2 co founders were still university students when they embark their portal. I wonder when did the venture capitalists came into the scene and did the early ones sell while major one came in later. how did yahoo manage to grow till today size. i meant they were still students back then, how did they finance their staffs. is it through own savings or thru the help of vc.
Of all, how does stock option works for their employees. Are these free. I wonder how much of % of the shares did Yahoo co founders retain after selling to the initiail vc. what support does vc gives beside $. Thanks.
