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Given a startup with 2 founders (one technical and one not-so) that's received VC funding (few millions). I've seen several startups in the same situations after a couple of years with >20 employees, and then it was about 0.4%. What's the "standard" for early employees? |
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Brian makes a good point about the type of talent #3 and #4 turn out to be. The typical equity pool for a VC backed startup is 20% of the total stock at each around. I will assume that the founders stock has already been distributed, so that's out of the picture. Dividing up that 20% equity pool is usually based on the position. One of the models I have seen looks like:
The numbers above would be how much of the company those positions own. For example, each VP would own 1.5% of the company. As you can image, it gets a little tricky trying to balance it all out given the number of employees you have. |
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I agree with Jarie, technical staff generally receive about .5% each of total pool of authorized shares for option plans. Keep in mind that vesting is typically on a four-year cycle with 25% of the grant vesting annually beginning on the first anniversary of the date of the grant. If the employee doesn't stick around, the unvested options go back into the treasury and can be used to hire another employee. |
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I think it depends on if you plan to recruit someone straight out of college or Linus Torvalds. But assuming you expect to hire someone who will be a solid performer but probably won't double the value of your company, you could figure out a total percentage of the company you want to set aside for future employees and then divide it up on a scale so earlier hires get proportionately more than later ones. But I would plan to adjust it based on the hire - to me the equity should be proportional to how much the person increases or maintains the value of the company. Another approach would be to come up with fairly high number for #3 and #4 and then use that to guide your hiring decision, i.e. is this person worth x% of the company? If the answer is no, keep looking. But you also have to balance that against the cost to the company of not having a #3 at all - a lesser talent may still be able to keep you from failing depending on the circumstances. |
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