> For example, suppose you're just two founders and you want to hire an additional hacker who's so good you feel he'll increase the average outcome of the whole company by 20%. n = (1.2 - 1)/1.2 = .167. So you'll break even if you trade 16.7% of the company for him.
> That doesn't mean 16.7% is the right amount of stock to give him. Stock is not the only cost of hiring someone: there's usually salary and overhead as well. And if the company merely breaks even on the deal, there's no reason to do it.
> I think to translate salary and overhead into stock you should multiply the annual rate by about 1.5. Most startups grow fast or die; if you die you don't have to pay the guy, and if you grow fast you'll be paying next year's salary out of next year's valuation, which should be 3x this year's. If your valuation grows 3x a year, the total cost in stock of a new hire's salary and overhead is 1.5 years' cost at the present valuation.
It really depends on the state of your company, your product, and what you're bringing to the table vs. your employees.
If you've got two non-technical founders and you're going to need an engineering team of 40 to bring your product to market, then excluding the dilution of investment, you probably want %50-%70 of the company in your pool.
Of course, if you're looking for a rule of thumb, it is usually %15-%20, and it doesn't matter what the state of things is, you offer senior engineers a fraction of a percent and no anti-dilution clauses....
Oh, and you split the stock enough such that this fraction of a percent sounds like a large number of shares.
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[ 3.0 ms ] story [ 19.2 ms ] threadI quote from the article:
> For example, suppose you're just two founders and you want to hire an additional hacker who's so good you feel he'll increase the average outcome of the whole company by 20%. n = (1.2 - 1)/1.2 = .167. So you'll break even if you trade 16.7% of the company for him.
> That doesn't mean 16.7% is the right amount of stock to give him. Stock is not the only cost of hiring someone: there's usually salary and overhead as well. And if the company merely breaks even on the deal, there's no reason to do it.
> I think to translate salary and overhead into stock you should multiply the annual rate by about 1.5. Most startups grow fast or die; if you die you don't have to pay the guy, and if you grow fast you'll be paying next year's salary out of next year's valuation, which should be 3x this year's. If your valuation grows 3x a year, the total cost in stock of a new hire's salary and overhead is 1.5 years' cost at the present valuation.
If you've got two non-technical founders and you're going to need an engineering team of 40 to bring your product to market, then excluding the dilution of investment, you probably want %50-%70 of the company in your pool.
Of course, if you're looking for a rule of thumb, it is usually %15-%20, and it doesn't matter what the state of things is, you offer senior engineers a fraction of a percent and no anti-dilution clauses....
Oh, and you split the stock enough such that this fraction of a percent sounds like a large number of shares.