Following up on the recent question about diluting the stock in this board, I would like to find out more about what do you recommend is a standard number of shares to issue for a new star-up.
To be honest I am not very clear about what is the typical number of shares that a company should start with - benefits or drawbacks, how many shares is common to keep and how many is common to offer to investors or new shareholders that you take on board.
I always work with % of the shares and never with the actual share numbers. I think its important to understand these as well, in case we need to dilute stock in the future.
Sorry if my questions sound silly, but to be honest I'm a little confused by this topic and like get my information straight, Thanks
Two places you should spend some time are:
Forming a new software startup, how do I allocate ownership fairly? and
http://www.investopedia.com/ I think the number of shares doesn't matter. Just pick something that is easy enough to divide. 100 shares at $1 million each is fine, if that works for you. If you need $1 shares, then you should issue 100 million shares. Look at Berkshire Hathaway's stock price. Percentages matter, number of shares does not.
Employee stock options are the option to buy stock at a fixed price within some period (say 10 years) and usually this right 'vests' over a number of years. That is, you issue someone options on 1,000 shares at $10 they get 25% of those each year so they get all of the options over four years. You can grant more each year this way but the idea is the employee loses a lot when they leave - kind of like golden handcuffs. Once the options vest, the employees has 10 years to execute the options and buy the shares at $10. If the share price is $25 then they earn a profit of $15 per share. If the stock price is below $10 then they employee would be a fool to exercise the options and they would be worthless.