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How Stock Options Work

Stock options make the most economical sense for larger startups with a relatively developed staff (senior management, rank-and-file, etc.). Since creating an options program is time intensive and requires highly specialized legal expertise, they’re quite costly to implement. Therefore, creating a stock options program for just one employee doesn’t justify the cost.   Here’s how […]

Don’t Accept Stock Options Without Considering These 11 Things

(1)  Seek percentages, not figures. Understanding what percentage of the company you own is usually the threshold question. That means knowing both the number of authorized shares, as well as the actual number that’s been issued to date. Having those figures will allow you to see the forest; without those numbers, all you can see […]

Tips To Determine The Amount Of Stock To Authorize and Issue To Founders

You want to ensure maximum flexibility to accommodate your company’s growth. Since authorized stock is the legal limit on the number of shares an organization is allowed to issue, remaining nimble enough to include future investors means authorizing enough at incorporation. What exactly is “enough” is an unknown for any startup; however, to avoid future […]

How Equity Should Be Split Between Founders, Employees, and Investors When Bootstrapped

Most equity splits are fixed. That means there’s a percentage of ownership that’s firmly allocated and not subject to change. Because of its rigid structure, it’s a minefield loaded with potentially explosive variables. For instance, it tends to lack the precision required to accurately weigh one person’s sweat equity against another’s financial contributions, especially as […]