How should early employees be compensated if founders have left and the company has pivoted?


2

I realize that Joel Spoelsky has written an extensive summary of how equity should be allocated (namely, fairly), but I was wondering how things might differ in slightly different circumstances...

I recently joined a company that pivoted only a few months before I joined. The company was still gaining traction, with probably about 6 months of runway. There were about four founders when the company started, but has since whittled down to just the one founder (with about 50% equity). I effectively replaced one of the founders as the CTO, and have been given 10% equity.

In this circumstance (or similar), where original founders have left, and the company has effectively started over, how much equity should be awarded to new employees?

Equity Employees Compensation

asked Aug 1 '12 at 06:15
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Nt3 Rp
115 points
  • Some additional info may help: Are you fulltime / being paid salary? Are the other 3 founders fully vested? – Jim Galley 7 years ago
  • The other three founders were not fully vested / we purchased the vested options. I am full-time and being paid a salary, though it is not at market-rate. The CEO / remaining founder is also making a salary, albeit a reduced one. – Nt3 Rp 7 years ago

1 Answer


3

If you're not market rate, then it may be worth having "the talk" with your remaining founder regarding fair and appropriate equity. That said, a lot of posts seem to point to founding CTO as 10-20% (and most leaning towards the bottom of the curve) - others point towards 50 / 50%. Given that you would (likely) be considered a non-founder, the CTO numbers drop to 1-5%: but that generally assumes that the company has locked down the business model, funding worthy and in growth stage.

That said, there is no hard and fast rule regarding equity - It boils down to what is considered fair and reasonable. You should do your research, compare you position to others found online and present a fair and balanced recommendation to your partner.

Don't forget to consider vesting as part of the discussion.

Best of luck!

answered Aug 1 '12 at 09:15
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Jim Galley
9,952 points

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Equity Employees Compensation