How Elon Musk made SpaceX take off by giving employees stock options

SpaceX’s earliest workers endured grueling hours, Elon Musk’s tirades, and even dangerous conditions — in part because they had equity in the company.

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Working at SpaceX in the company’s earliest days was intense, but it may pay off for some hires. Tough working conditions might tank some businesses, but not SpaceX. On December 11, Bloomberg reported that the Elon Musk-founded company was valued at $350 billion, making it the most valuable private startup worldwide. The value comes after SpaceX and some of its approved investors struck a deal to buy up to $1.25 billion of employees’ shares, offering $185 a share. Therein lies a partial key to SpaceX’s overwhelming success. Like many tech startups, SpaceX offered its early employees stock options as a financial incentive to keep them invested in the company’s success — even when they were exposed to Musk’s strict standards, his bouts of shouting when things went wrong, and his near-impossible timelines, space journalist Eric Berger reported. In his new book “Reentry,” Berger shares current and former employees’ accounts of working 36-hour days, sleeping under their desks, urinating in buckets, dodging rattlesnakes, and injuring themselves on the job. Stock options are a toss-up. They don’t always end up being valuable. SpaceX was proving its value early, though. “Even as far back as 2010, you could see that that had real value if you stayed there,” Berger told Business Insider. Offering stock options is a common strategy, especially for early-stage companies that don’t have much cash for salaries, said Jorge Martin, head of the employee-equity plan provider North American branch of JP Morgan Workplace Solutions. “When they are working these grinding hours, when they are traveling all over the world, when they’re under high pressure,” Martin said, “then all of that is worth it when you have an equity grant that can grow as the company grows and as the company succeeds.” Martin said he’s occasionally seen startup employees become millionaires off their equity. The promise of those stock options gave SpaceX a competitive edge in recruiting top engineering talent. In the scramble for new hires fresh out of college in the 2010s, SpaceX, Berger said, often competed with Blue Origin, a similarly ambitious rocket company founded by Jeff Bezos. “They would poach people back and forth,” Berger said. Workers can turn shares into cash when a company gets sold or goes public — which SpaceX has not done — or when it does a “tender offer,” allowing employees to sell their shares to other investors. Blue Origin has a stock ownership program too, Berger said, but it’s “considered virtually worthless because Bezos is probably never going to sell a significant chunk of the company. So those shares can never really be sold.” SpaceX, meanwhile, has given its employees multiple opportunities to cash in on their shares, including through the deal it struck this month. SpaceX offered some of its early employees more than stock. Some truly believed in Musk’s plans to build a human settlement on Mars. Unlike a regimented job at NASA or a legacy aerospace corporation, a gig at SpaceX meant working hands-on with multiple ambitious rockets, spaceships, or engines — back to back or simultaneously. “You’re going to work super hard, but you’re also going to get to work on cutting-edge stuff, stuff that’s actually going to fly,” Berger said. “After a few years there with that on your résumé, you can basically write your ticket anywhere in the industry you want to go.” For some employees, Berger found, the stock was icing on the cake. SpaceX did not respond to a request for comment. Jump to

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