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How do I allocate equity to early employees?

Navigating the equity question
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The Basics

Issuing equity to first employees is different than issuing equity to co-founders. While co/founders are typically issued anywhere from 10-50+% of authorized shares, early employees usually get anywhere from .1% for a non-essential hire to 5% for an early C-suite role, which can also vary based on their salary offer. When deciding to issue equity, be sure to consider the employee's future value to the venture, not their prior contributions. To ensure commitment, many companies set up a Vesting Schedule, where employees (and often cofounders) only earn their shares after staying on for a certain amount of time. After you have decided on the amount and type of equity (Stock options, grants, warrants, etc) you’ll prepare an Equity Compensation Agreement, outlining the number of issued shares, the vesting terms, the class of stock, and other key information. Once this is signed, you’ll issue the proper class/amount of shares either through your lawyer or your cap table management software.

The Details

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