Employee Equity

Employee Equity

December 19, 2023 by investor

Employee Equity

Equity compensation for employees varies greatly based on the location, type of startup, and job to be done.

An overall allocation for employees is around 15% of the total equity.

The first five hires receive 1% to 2% each.

Later employees receive 0.25% to o.5% each.

You can also apply a multiplier against the employee’s salary.

This makes it easy to apply to employees across the board.

Director level and above receive 1% while those below receive 0.5%.

Employees seeking a higher salary receive a lower equity percentage.

Those accepting a lower salary receive a higher equity percentage.

Contractors typically don’t receive equity.

Other factors impacting the equity decision include the current market conditions.

You can use equity to compensate seed-stage employees with salaries well below market rate.

Vest the equity over four years with a one-year cliff.

This ensures the employee stays with the company for a meaningful period.

Capture all equity agreements into the cap table.

Remember, follow-on fundraises will dilute all the employee shareholders similar to the founder and co-founder. 


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