Comment by garry
6 years ago
We usually encourage folks to give at least 10% of the equity to the first 10 employees. That's what Stripe did and it worked well.
That number is going up over time, so I can report at least a little bit of improvement, though certainly not fast enough.
Equity or options? If options, what happens if they leave pre-liquidity? If it's, "they have 90 days to exercise", see this comment on the counterpoint thread: https://news.ycombinator.com/item?id=21868797. To summarize: screw that. If it's actually straight equity you recommend, how do you recommend the dilution work? Is it tied to the founders' own dilution? If not, what incentives do the founders have to not throw their early employees under the bus in future rounds? Even if all of this is done right: 10% seems likely to be too low for the risk.
Honestly I think 10% should be a floor for this, and considered completely separately from the usual 10%+ option pool (for the ones that come after the first approx 10).
For that matter heading out of a seed round with very roughly 1/3 founders 1/3 employees 1/3 angels/whatever seems pretty sane to me, although a bunch of that first 2/3 should not have vested yet. Your second tranche their would hold a largish option pool for growth, and a bunch of "founding employee" equity. You are all going to get diluted to hell, but however it eventually shakes out I think that collectively those starting key employees should see roughly the same outcome as individually a founder does....