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Equity is the most valuable thing startup founders can offer
But most founders don't know how much to give early employees
Use these 8 factors to determine how much to offer:
But most founders don't know how much to give early employees
Use these 8 factors to determine how much to offer:
Role Type:
Engineers have different equity expectations than marketing managers.
Roles that are harder to recruit for have the leverage to demand higher grants.
Candidates who make commission sometimes don't expect a grant at all.
Here's an example from Index Ventures:
Engineers have different equity expectations than marketing managers.
Roles that are harder to recruit for have the leverage to demand higher grants.
Candidates who make commission sometimes don't expect a grant at all.
Here's an example from Index Ventures:
Employee Number:
The first non-founder who joins a startup is taking on a lot of risk.
Much more than the 10th employee, or even the 2nd.
This chart from Carta shows the typical distribution for your first 10 hires:
The first non-founder who joins a startup is taking on a lot of risk.
Much more than the 10th employee, or even the 2nd.
This chart from Carta shows the typical distribution for your first 10 hires:
Role Importance:
Engineers may be less valuable for one startup than another.
For example, my last startup was an IRL product that could largely be supported by no-code tools.
That wouldn't be true for an AI infrastructure company.
Don't overpay for less critical roles.
Engineers may be less valuable for one startup than another.
For example, my last startup was an IRL product that could largely be supported by no-code tools.
That wouldn't be true for an AI infrastructure company.
Don't overpay for less critical roles.
Candidate Seniority:
Can this person be a leader on your team?
Do you see them eventually managing a team, or an entire org?
If so, incentivize them to stay around for the long term.
Can this person be a leader on your team?
Do you see them eventually managing a team, or an entire org?
If so, incentivize them to stay around for the long term.
Location:
There's no unified framework for equity grants around the world.
Candidates in some countries may be less willing to compromise on cash in favor of equity.
When putting together an offer, use a tool like Pave to understand the norms in a candidate's home market.
There's no unified framework for equity grants around the world.
Candidates in some countries may be less willing to compromise on cash in favor of equity.
When putting together an offer, use a tool like Pave to understand the norms in a candidate's home market.
Develop a Framework:
Do you want your startup to offer equity grants at the 50th percentile of the market?
Higher → Sell candidates on the value of the equity
Lower → Sell candidates on how much they'll learn at your startup
There's no right answer, just be consistent.
Do you want your startup to offer equity grants at the 50th percentile of the market?
Higher → Sell candidates on the value of the equity
Lower → Sell candidates on how much they'll learn at your startup
There's no right answer, just be consistent.
Candidate Quality:
Getting rockstars on your team is more important than staying with recommended equity guidelines.
Negotiate in good faith, but don't hold onto equity just for the sake of it.
If a candidate will change the trajectory of your startup, pay up.
Getting rockstars on your team is more important than staying with recommended equity guidelines.
Negotiate in good faith, but don't hold onto equity just for the sake of it.
If a candidate will change the trajectory of your startup, pay up.
Cash + Other Considerations:
Equity is only one piece of an offer.
Candidates may have unique circumstances or just ask for higher salaries.
Use the equity component of the offer as a negotiating chip.
Optimize for employees who see the value of the equity and want more.
Equity is only one piece of an offer.
Candidates may have unique circumstances or just ask for higher salaries.
Use the equity component of the offer as a negotiating chip.
Optimize for employees who see the value of the equity and want more.
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Determine employee equity grants based on:
1. Role type
2. Employee number
3. Role importance
4. Candidate seniority
5. Location
6. Develop a framework
7. Candidate quality
8. Cash + other considerations
1. Role type
2. Employee number
3. Role importance
4. Candidate seniority
5. Location
6. Develop a framework
7. Candidate quality
8. Cash + other considerations
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