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How much Equity should you give Employees / Advisors / Co-Founders in Your Startup?


This is one of the most common questions that comes to me, and I’ll give my thoughts here on some broad thumb rules.


👉🏼 Co-Founders


Ideally, there should be an equal split between co-founders. Even if one has joined 6-12 months later and no funding has been raised, I’d suggest keeping it equal.


At times, one founder has a patent / IP asset that they’ve built over years and then gotten another co-founder to commercialise it. This makes them feel that their share should be higher, which is fair if there has been a substantial cost that has gone in developing the product. If it’s just time invested, I’d say best to keep it 50:50. At max 10-15% additional equity and no more.


An absolute must is a “Reverse Vesting” clause over 4 years in the co-founders’ agreement, so that if any co-founder leaves, they don’t take equity away


👉🏼 Employees


The first employee is typically given no more than 0.75% of the company, which reduces with every subsequent hire such that the first 10 key hires collectively have no more than 2.5% of the company.


ESOP Pools vary between 8 to 20% - start with 8% only


If you have 8% ESOP Pool, and only 5% is allocated till the next milestone, then when you expand the pool... double the unissued pool, so from 8%, it will go on to at max 11% i.e. 5% issued + 2x3% unissued.


ESOPs typically vest over 4 years - straightline vesting with 1 year cliff is standard


During increments, key employees can be offered to take either cash increment or 2-3X of the proposed increment in equity


👉🏼 Advisors


The total advisor pool should ideally not be more than 2%, from which you can have at max 4-5


Each Advisor should ideally not be given more than 0.25% and exceptions get 0.5%


Vests over 2 years


👉🏼 Top Management


If you’ve hired a CXO after Series A, they may expect anywhere between 2-5%


Again, this is only a broad framework for thinking. Changes with each case.


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A Chartered Accountant with about 10 years of experience in areas of Tax Advisory, Startup Consulting, Fundraising, Audits, Deal Advisory, Business Modelling and contract CFO services.


Winner of the ISB Young Leader Award 2017 and the Best All Rounder, PGP Class of '17, Sarthak has also been published about in the leading financial newspapers such as The Financial Express as possibly the youngest Indian to have completed the courses of CA, CS and CMA along with a graduate degree in Financial & Investment Analysis from University of Delhi, all by the age of 23 years.