How Much Equity to Give Early Employees
Early employees take a risk by joining a startup, and equity is how they share in the upside. The amounts should be fair, consistent and planned against the option pool, not decided offer by offer.
How much equity should early employees get?
It depends on stage, role and seniority, and grants shrink as the company grows and the risk falls. Plan grants against your hiring plan so the pool lasts until the next round. Express offers in numbers of options, with vesting, rather than percentages that will change. How options work and are taxed is covered in employee stock options.
| Hire | Role | Options | Fully diluted |
|---|---|---|---|
| 1 to 3 | Senior engineers and first product lead | 100,000 to 150,000 | 1.0% to 1.5% |
| 4 to 10 | Engineers, designer, first seller | 40,000 to 80,000 | 0.4% to 0.8% |
| Executive hire | VP or head of a function | 150,000 to 250,000 | 1.5% to 2.5% |
| Advisor | Specific expertise, 1 to 2 years | 25,000 to 75,000 | 0.25% to 0.75% |
How do you budget the option pool?
List the hires you plan before the next round and sum their grants, plus a buffer for a senior hire and refreshers. If that is 10% of the company, the pool should be about 10%. Investors often ask for the pool to be topped up before their investment, which dilutes founders, not the new investor; see dilution and funding rounds.
What are refresher grants?
Additional grants to existing employees, usually after two or three years or at a promotion, so their unvested equity doesn’t run out. Budget for them in the pool. Without refreshers, your most experienced people have the least reason to stay once their first grant vests.
How much equity should advisors get?
Less than founders and early employees, and only for specific, ongoing help: introductions, expertise or credibility you can name. Use a written advisor agreement, vest over one to two years with no or a short cliff, and record it on the cap table. Avoid open-ended advisor grants given at the first meeting.
Budget the pool before you make offers.
Generous early grants feel good until the pool runs out before the hire you most need.
What should you do now?
- Write the hiring plan to the next round.
- Set grant ranges by role and level, and apply them consistently.
- Size the pool to the plan plus a buffer.
- Offer options as counts, with vesting and an example of value.
- Review refreshers once a year.
Founder equity comes first: how to split equity with a co-founder. Grants are part of total pay, covered in startup compensation and benefits.
Frequently asked questions
How much equity should a first employee get?
Often around 0.5% to 1.5% for the first senior hires at seed, less for later hires. It depends on role, seniority and stage.
How big should the option pool be?
Often 10% to 15% at seed, sized to the hiring plan until the next round.
Should offers state equity as a percentage?
No. State the number of options and vesting; percentages change with every round.
What is a refresher grant?
An additional option grant to an existing employee, often after two or three years or at a promotion.
How much equity should an advisor get?
Often 0.25% to 1%, vesting over one to two years, for specific and ongoing help.
Who approves option grants?
The board, under a written option plan.