

Ask HN: Best Stock Options Guide - Kinnard

What&#x27;s the best guide for an entrepreneur looking to set up an options program you&#x27;ve come across?
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mtmail
"In 2008, Y Combinator open-sourced a simplified set of Series AA Preferred
Stock financing documents designed to streamline the early stage equity
financing process."

[http://www.ycombinator.com/documents/](http://www.ycombinator.com/documents/)

Have a look at the stock purchase agreement.

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rahimnathwani
Start with articles from feld.com and askthevc.com for basic principles. The
main points:

1) Set aside an option pool (e.g. 10% of issued equity) so you don't need to
go back to investors to approve each new grant.

2) Think about how employees value equity. If someone values equity at zero,
or much lower than how you value it, then maybe pay them x more cash instead
of equity (where x>0).

3) For senior hires or others who you expect to contribute materially to the
success of the business, make sure the equity is meaningful.

4) Everyone's equity (even some of yours) should vest over time (e.g. 4
years). Exception: equity which is paid for with cash money, like external
funds.

5) Think about what you will do if someone underperforms, but isn't terrible.
If an employee is doing their job well enough that you don't want to fire
them, but much less well than when you decided how much equity to grant them,
what will you do? (Distinguish this from the case when the equity rises in
value significantly, so everyone's vesting looks generous. That's great, and
fair compensation they took on as early employees.)

6) Get proper advice about the tax stuff in your country/state. Google stuff
like 'qualifying options', '409a valuation', and the different tax
implications of granting options vs. restricted stock vs. stock with a
repurchase agreement.

Those are the general things to consider. Contact details are in my profile if
there's additional info you can share, which you can't post here.

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Kinnard
I mean employee stock options.

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escaped_hn
You have a better chance at betting on black in a casino than getting ahead
trading options.

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mastermojo
Not trading options, setting up stock options for employees.

