The Founder’s Basic Guide to Employee Equity for Early-Stage StartupsGrowth & Scaling
Your startup is growing fast.
Whether you’re eyeing potential co-founders to join your fleet or lining up the next set of devs to carve out your product, you’ll need a way to snatch the top talent.
That’s where employee equity comes in clutch.
As part of a compensation package, offering equity to new hires is your bargaining chip to securing an awesome team of high performers who are committed to a long-term vision with your company.
Equity rewards employees with a piece of the pie and is kind on your cash reserve when money’s tight, so it’s a win-win.
The idea is that the value of equity multiplies year over year as the valuation of your startup goes up.
Here’s what every founder should know about employee equity in an early-stage startup.
- A simple introduction to employee equity
- The two types of startup equity: common stock vs. preferred stock
- Why you should care about employee equity for your startup
- What about sweat equity and how much is it worth?
- The founder’s glossary: 9 terms that should show up on your employee equity offers
Building Your Compensation Model
- How to create an employee stock option pool (ESOP)
- Calculate ownership with Havest’s free cap table template
- AngelList’s interactive tool that sorts salary and equity compensation by position, skill, and location
- 7 ways to think about equity in a SaaS startup, brought to you by Dan Martell
- 3 ways to determine the value of your equity
- Timing matters–and so do roles. A benchmark on how much equity to assign to each employee, including your CEO, COO, engineers, and later hires
- The equity equation: a formula for splitting compensation from Founder and CTO of TechEmpower, Tony Karrer
- Understanding the vesting period
- Now, what’s this about a cliff?
- The 90-day rule: what happens when options vest
- Tax implications on employee stock options
And there you have it–your cheat sheet on how employee equity works in an early-stage startup.
As a founder, providing equity as part of your employee compensation can help you recognize who’s highly motivated to drive your company forward.
Knowing what stocks to offer, how they’re granted over time, and how much risk your employees are willing to take are all important steps to incentivize and reward the players on your team as your company scales.