Comments on: The one number you should know about your equity grant http://cdixon.org/2009/08/27/the-one-number-you-should-know-about-your-equity-grant/ Fri, 10 Sep 2010 13:10:43 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Munish http://cdixon.org/2009/08/27/the-one-number-you-should-know-about-your-equity-grant/comment-page-2/#comment-9231 Munish Tue, 15 Jun 2010 00:29:55 +0000 http://www.cdixon.org/?p=467#comment-9231 Addign a clarification...<br>75% pay cut = taking only 25% or little less salary just for sustainment. Addign a clarification…
75% pay cut = taking only 25% or little less salary just for sustainment.

]]> By: Munish http://cdixon.org/2009/08/27/the-one-number-you-should-know-about-your-equity-grant/comment-page-2/#comment-9230 Munish Tue, 15 Jun 2010 00:27:49 +0000 http://www.cdixon.org/?p=467#comment-9230 I found your blogs having the best straight out of the heart and "real" content. And also lot of questions answered. I found it getting related totally with whatever thoughts i have made till now of startup land. Thanks for guiding people like me.<br><br>I am going to join an internet start-up next month pre-funding.<br>Currently the brief status is:<br> <br>2 founders spent 1+ yr bootstrapping<br>4 fresh out of college engineers made offers to join mid-this month.<br><br>They are giving final touches to their product's working demo for 1st round VC funding hoping for a $2M+.<br><br>I am 6 yrs experienced and going in for an Architect role.<br>I am going on a 75% pay-cut, since till now the company is funded by founders' own pocket. But i have planned things and i am out of "safe company" mode and prepared to WORK in startup mode.<br><br>They haven't yet formulated their final offer to me but What kind of equity should i be looking at in % terms ? <br><br>Your input on this will be highly beneficial for me.<br><br>Thanks !<br>MG I found your blogs having the best straight out of the heart and “real” content. And also lot of questions answered. I found it getting related totally with whatever thoughts i have made till now of startup land. Thanks for guiding people like me.

I am going to join an internet start-up next month pre-funding.
Currently the brief status is:

2 founders spent 1+ yr bootstrapping
4 fresh out of college engineers made offers to join mid-this month.

They are giving final touches to their product's working demo for 1st round VC funding hoping for a $2M+.

I am 6 yrs experienced and going in for an Architect role.
I am going on a 75% pay-cut, since till now the company is funded by founders' own pocket. But i have planned things and i am out of “safe company” mode and prepared to WORK in startup mode.

They haven't yet formulated their final offer to me but What kind of equity should i be looking at in % terms ?

Your input on this will be highly beneficial for me.

Thanks !
MG

]]> By: What Employees Should Know About Option Pools « Seravia Research http://cdixon.org/2009/08/27/the-one-number-you-should-know-about-your-equity-grant/comment-page-2/#comment-7173 What Employees Should Know About Option Pools « Seravia Research Wed, 03 Mar 2010 10:37:39 +0000 http://www.cdixon.org/?p=467#comment-7173 [...] understanding of all the issues surrounding option pools. In fact, all you really need to know is how much of the company you’re going to own. However, understanding a little bit about option pools will give you some useful insight to where [...] [...] understanding of all the issues surrounding option pools. In fact, all you really need to know is how much of the company you’re going to own. However, understanding a little bit about option pools will give you some useful insight to where [...]

]]> By: AJ http://cdixon.org/2009/08/27/the-one-number-you-should-know-about-your-equity-grant/comment-page-2/#comment-6396 AJ Mon, 01 Feb 2010 08:15:07 +0000 http://www.cdixon.org/?p=467#comment-6396 I agree with Nivi. Share price matters. Focusing on % ownership is not that meaningful (even though it gives a yardstick). I agree with Nivi. Share price matters. Focusing on % ownership is not that meaningful (even though it gives a yardstick).

]]> By: Be wary of very early stage startups that casually offer you equity in return for your services « Bits of Kelly http://cdixon.org/2009/08/27/the-one-number-you-should-know-about-your-equity-grant/comment-page-2/#comment-6153 Be wary of very early stage startups that casually offer you equity in return for your services « Bits of Kelly Mon, 25 Jan 2010 21:47:05 +0000 http://www.cdixon.org/?p=467#comment-6153 [...] and if you can afford to give up any prospect of money for 3 years or more, make sure you get the one and only number that really matters for equity grants: your percentage ownership.  The grant should also come with an option plan document [...] [...] and if you can afford to give up any prospect of money for 3 years or more, make sure you get the one and only number that really matters for equity grants: your percentage ownership.  The grant should also come with an option plan document [...]

]]> By: Valuing Startup Options @ Hyperextended Metaphor http://cdixon.org/2009/08/27/the-one-number-you-should-know-about-your-equity-grant/comment-page-2/#comment-5635 Valuing Startup Options @ Hyperextended Metaphor Mon, 04 Jan 2010 03:53:02 +0000 http://www.cdixon.org/?p=467#comment-5635 [...] issue. The company should be willing to tell you this. Chris Dixon has a great post about this in The one number you should know about your equity grant. That post says it better than I could: you need to know the fraction, and the company must be [...] [...] issue. The company should be willing to tell you this. Chris Dixon has a great post about this in The one number you should know about your equity grant. That post says it better than I could: you need to know the fraction, and the company must be [...]

]]> By: Mark Essel http://cdixon.org/2009/08/27/the-one-number-you-should-know-about-your-equity-grant/comment-page-2/#comment-4894 Mark Essel Sun, 29 Nov 2009 20:49:07 +0000 http://www.cdixon.org/?p=467#comment-4894 I miss Disqus on this 11th popular post. I give it a 9/10 because it's short, sweet, and absolutely vital to anyone who wants to consider joining or running a startup. Don't play games if you expect to find smart people that will work for the best growth/profitability of your business. Love the succinctness of this post, certainly after reading posts and comments for the past few hours ;). I miss Disqus on this 11th popular post. I give it a 9/10 because it’s short, sweet, and absolutely vital to anyone who wants to consider joining or running a startup.

Don’t play games if you expect to find smart people that will work for the best growth/profitability of your business.

Love the succinctness of this post, certainly after reading posts and comments for the past few hours ;) .

]]> By: John Chan http://cdixon.org/2009/08/27/the-one-number-you-should-know-about-your-equity-grant/comment-page-2/#comment-3905 John Chan Sat, 10 Oct 2009 15:56:07 +0000 http://www.cdixon.org/?p=467#comment-3905 Thanks for the post! My 2 cents: For an employee, I think price per share captures enough information. You are basically telling your employees: You get a salary plus bonus. Bonus is in the form of options. This year, you get 10,000 options at $5 (ignore strike price for simplicity). That's worth $50,000 today. It may increase as the company does better (partly your responsibility...as a valued team member) or it may decrease if we all mess up (down round or business failure). See it as a non guaranteed bonus. The only thing that is guaranteed is salary. That's the whole concept of thinking of options NOT as a lottery ticket but as compensation. The following year, the company will grant you more options. What more does the employee need to know? I think if you are asking them to think about % stake from the beginning you are encouraging them to think about lottery ticket payouts rather than the merits of the job/career itself. Thanks for the post!

My 2 cents:

For an employee, I think price per share captures enough information. You are basically telling your employees: You get a salary plus bonus. Bonus is in the form of options. This year, you get 10,000 options at $5 (ignore strike price for simplicity). That’s worth $50,000 today. It may increase as the company does better (partly your responsibility…as a valued team member) or it may decrease if we all mess up (down round or business failure). See it as a non guaranteed bonus. The only thing that is guaranteed is salary. That’s the whole concept of thinking of options NOT as a lottery ticket but as compensation. The following year, the company will grant you more options.

What more does the employee need to know? I think if you are asking them to think about % stake from the beginning you are encouraging them to think about lottery ticket payouts rather than the merits of the job/career itself.

]]> By: Kiruha http://cdixon.org/2009/08/27/the-one-number-you-should-know-about-your-equity-grant/comment-page-2/#comment-3179 Kiruha Sun, 27 Sep 2009 04:50:32 +0000 http://www.cdixon.org/?p=467#comment-3179 Хорошо, давайте обсудим это в отдельной теме. Хотя это не столь важно. Хорошо, давайте обсудим это в отдельной теме. Хотя это не столь важно.

]]> By: Mark MacLeod http://cdixon.org/2009/08/27/the-one-number-you-should-know-about-your-equity-grant/comment-page-2/#comment-2482 Mark MacLeod Mon, 14 Sep 2009 12:49:56 +0000 http://www.cdixon.org/?p=467#comment-2482 Chris, I agree with you even though I don't always practice what I preach for the simple reason that this transparency can sometimes create cultural issues internally. In my experience, developers discuss their compensation openly. I may have individual team members with very different option %s based on when they joined primarily. When you know your colleague has 3x more upside than you that affects your daily motivation. I know that most option grants don't generated the incentives we hope for as managers and most staff don't drink the kool aid and think they'll get rich, so we need to fix it. And so, you're right to bring this up. I just do worry about the effect this level of transparency has on team morale. How much time will you spend educating people on why its a good thing that post the next funding round their % went down? I'm going to stop now, because the more I write, the more I think you're bang on (i.e. if everyone knows and sees their personal dilution, it can be motivating so everyone pushes harder to keep things capital efficient). Thus endeth this Monday morning stream of consciousness. Chris,

I agree with you even though I don’t always practice what I preach for the simple reason that this transparency can sometimes create cultural issues internally.

In my experience, developers discuss their compensation openly. I may have individual team members with very different option %s based on when they joined primarily.

When you know your colleague has 3x more upside than you that affects your daily motivation.

I know that most option grants don’t generated the incentives we hope for as managers and most staff don’t drink the kool aid and think they’ll get rich, so we need to fix it. And so, you’re right to bring this up. I just do worry about the effect this level of transparency has on team morale.

How much time will you spend educating people on why its a good thing that post the next funding round their % went down?

I’m going to stop now, because the more I write, the more I think you’re bang on (i.e. if everyone knows and sees their personal dilution, it can be motivating so everyone pushes harder to keep things capital efficient).

Thus endeth this Monday morning stream of consciousness.

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