Re:Ask YC: Normal Options/Equity for Employee Number 1
by timr on Monday July 07, 2008 @08:07PM
(#239357)
It also depends on the quality of the employee, and the amount of incentive you want to offer her to stay with your company over the long term.
I think that founders (due to their enthusiasm/optimism) tend to forget two important truths about option grants:
1) Options aren't salary. They don't "make up" for below-market wages.
2) Options are time-delayed bonuses that provide incentives for your early employees to stick around.
If you try to economize by offering piddling option grants that vest over a long period of time, you're just defeating their purpose as an incentive. Moreover, a rational employee isn't going to accept or reject your offer based on the option grant alone; they'll decide if they like the rest of the offer/company/work first, then treat the options grant as a hypothetical bonus for taking the risk of working for an tiny company that will probably fail very quickly anyway.
My advice is to offer your first engineer enough to give them a reasonable shot of becoming a millionaire in the event of a $50M exit (so, at least 2%).
I think that founders (due to their enthusiasm/optimism) tend to forget two important truths about option grants:
1) Options aren't salary. They don't "make up" for below-market wages.
2) Options are time-delayed bonuses that provide incentives for your early employees to stick around.
If you try to economize by offering piddling option grants that vest over a long period of time, you're just defeating their purpose as an incentive. Moreover, a rational employee isn't going to accept or reject your offer based on the option grant alone; they'll decide if they like the rest of the offer/company/work first, then treat the options grant as a hypothetical bonus for taking the risk of working for an tiny company that will probably fail very quickly anyway.
My advice is to offer your first engineer enough to give them a reasonable shot of becoming a millionaire in the event of a $50M exit (so, at least 2%).