What makes you think the residuals would fare better than the options? The risk is about the same, yes?

My intuition is that residuals have a higher chance of a low payout, whereas options have a lower chance of being worth anything, but probably a higher value if they do pay off.

Residuals for a company which is bankrupt would be zero - same as their stock price.

Also, they could just rewrite the sections of code that are expensive and nuke their costs and your residuals at any point. Unlike a brand or whatever, it’s trivial to redo as it’s not user facing.

No because with options you may have to wait for your liquidity event forever.

If you think any sane founder is going to pay out on ‘residuals’ of any significant amount without a similar liquidity event, I’ve got a bridge to sell you.

I’d agree, especially if they’re relying on VC funding to power through growth.

Some private companies pay dividends on their shares, so they have value to employees even if there is no market for them.

Yeah, that's a fair point. I've never had any of those shares, but I'm sure they exist. I'd probably take that over residuals.