ReadWrite asked 13 business owners and entrepreneurs “How much stock is enough?” when it comes to non-tech hires. For me, I believe that you can figure it out with a math equation. There’s no need to reinvent the wheel—others have already done all the hard work for you! Look at Paul Graham, the co-founder of Y Combinator. His equation is 1/(1-n) assuming “n” is the equity you’re willing to give up. The equation makes sense if the result is making the company worth more than the equation. On the other hand, I’m a sucker for the basics. A one year cliff and four year vesting? Sounds good to me.
Find out what the others had to say. Some say you should base it on however many employees you have, making it easily scalable. For others, it’s all about your capital considerations. Choose what you want everyone to know first is the advice of other entrepreneurs. Use AngelList, or start with an option pool first, these are other great ideas.
Let performance dictate your next move, or keep a vesting pool that can be scaled up or down. How critical the hire is can determine stock options, or use equity to level the playing field. Be flexible, quantify, and think in dollars—not in shares. No matter what, make sure the compensation meets market value. There are many ways to keep your employees interested via stocks, so try out the method that works best for you.
