The only downside of early exercise I can see for the company is accounting for the cash and being ready to buy-back unvested shares as-needed. Since the tax implications are potentially massive for the employee, and we're talking de-minimis work for the employer, early exercise should be a standard term on all ISO contracts. I see this as an educational opportunity for Founders, and if you see a contract without early exercise I certainly wouldn't hesitate to question it.
Early exercise is great for the majority of situations. The 100k limit for ISO options can be a potential downside. If there is a spread between the strike price and the FMV, only the first 100k worth of shares will be considered ISOs and the rest will be treated as NSOs. In the case of no early exercise, you could get 100k of ISOs per year for the 4 years.
