QUESTION:
We’re looking at bringing on a VP of sales, and I was thinking about providing a 0.75 – 1% equity stake with a 3 year vesting period. Is this about right? We’re pre-funding right now.
ANSWER:
Naomi Kokubo
by Naomi Kokubo, Cofounder of Founders Space
Based on what I’ve seen in the past, 0.5% to 3% is typical for an experienced VP post Series A funding. Pre-funding it’s usually much higher. But it depends on what you’re paying this person. If you’re giving a full salary, then less equity is fine. Most startups pre-funding can’t afford much of a salary, so they usually compensate with higher equity. Also, the employee will be taking significant dilution upon funding, so you want their equity to be enough to motivate them both pre and post funding.
Some of it comes down to the person and how valuable he/she is. If the person is experienced and can bring a lot to the table, the pre-funding stock options should be significantly higher. But again, it’s on a case-by-case basis. A four year vesting schedule is typical.
Great advice! I’m in a similar situation.
Thanks!
As a retained executive recruitment consultant with near two decades of experience recruiting for both start ups and Fortune 50 I agree with most of the previous post. I will say 1% minimum for a member of your executive team. Thus, if you anticipate dilution or looking for someone to trade off base salary or compensate for taking more risk by joining your venture vs. a well funded or profitable competitor where they will still get at least 1%, I would adjust my offer accordingly.
Good Luck!