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Saastr
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Dear SaaStr: How Much Equity is Typically Given Out to the First 50 Employees?
- Typically, for the first 50 employees at a venture-backed startup, around 10%-20% of the company's equity is allocated in the employee stock option pool (ESOP).
- The equity distribution for employees depends on various factors like hiring pace, growth stage, and future hiring plans.
- Start-ups commonly allocate 15%-20% of the cap table for employees initially and grant 6%-8% of equity annually as they scale.
- Early employees, especially the first 10, often receive larger equity grants for their risk-taking contributions.
- Initial employees may receive roughly 2x a normal grant for their role and seniority.
- As the company grows, equity grants for later hires usually decrease but remain meaningful.
- Employees, as a group, may own about 10%-20% of the company at IPO or exit.
- Equity allocation is crucial for attracting and retaining top talent.
- Equity distribution needs to be refreshed to accommodate new hires and retain talent.
- Various rounds of funding and dilution affect the overall equity ownership by employees.
- Equity is a key incentive for employees in start-ups.
- Balancing equity distribution at various stages of a start-up's growth is important for maintaining incentives.
- The equity percentage for employees is dynamic and subject to adjustments based on company growth.
- Equity allocation considerations are essential for the success and longevity of a start-up.
- Equity grants reflect the level of risk, contribution, and stage of involvement of employees.
- Distribution of equity among early employees is typically more substantial than for later hires.
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