

Ask HN: How much equity is reasonable for early employees? - skowmunk

How much equity is it reasonable to offer to employees(lets say, the first 10) who have joined you in early stage startup phase?
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barredo
I'm interested in practical cases for this too. Also, check this link by pg
<http://paulgraham.com/equity.html>

I quote from the article:

> For example, suppose you're just two founders and you want to hire an
> additional hacker who's so good you feel he'll increase the average outcome
> of the whole company by 20%. n = (1.2 - 1)/1.2 = .167. So you'll break even
> if you trade 16.7% of the company for him.

> That doesn't mean 16.7% is the right amount of stock to give him. Stock is
> not the only cost of hiring someone: there's usually salary and overhead as
> well. And if the company merely breaks even on the deal, there's no reason
> to do it.

> I think to translate salary and overhead into stock you should multiply the
> annual rate by about 1.5. Most startups grow fast or die; if you die you
> don't have to pay the guy, and if you grow fast you'll be paying next year's
> salary out of next year's valuation, which should be 3x this year's. If your
> valuation grows 3x a year, the total cost in stock of a new hire's salary
> and overhead is 1.5 years' cost at the present valuation.

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lzw
It really depends on the state of your company, your product, and what you're
bringing to the table vs. your employees.

If you've got two non-technical founders and you're going to need an
engineering team of 40 to bring your product to market, then excluding the
dilution of investment, you probably want %50-%70 of the company in your pool.

Of course, if you're looking for a rule of thumb, it is usually %15-%20, and
it doesn't matter what the state of things is, you offer senior engineers a
fraction of a percent and no anti-dilution clauses....

Oh, and you split the stock enough such that this fraction of a percent sounds
like a large number of shares.

