Stock Options

Here is info about stock options based on my experience from several VC-backed companies, of my own, and of friends.

There are three chunks of stock in any startup:

1. Founder equity. This is typically 30-40% or more, split across the cofounders (often two people sometimes more). Often more than this at first, and then dilutes with each round of investment.

   I prefer two equal cofounders, with same stock and comp plan as each other. Building a startup is a ton of work, and I think it works best - and drives founders the hardest - if they are equal partners. If one founder started before the other, the way to deal with this is with vesting schedule, not with giving the second founder less equity. Unless the second founder starts after a team has been hired and there is a product and customers, at which point the newer cofounder should get less equity than the original founder.

2. Investor equity. This can range 20-40% during the "Series A" (first big financing), but it grows over time as more money is raised in later rounds.

3. Employee stock option pool. This is typically 10-20% of the company. VPs usually get 1-2% each if they join at the beginning, but less than that if they join "later". Other employees often get 0.1% or so if they join at the beginning, but the amount can vary widely. Dilutes with each new round of investment.

About Vesting

Most VC-backed technology companies will "vest" your stock monthly over four years, with a one year "cliff". The cliff means that if you leave before your first year anniversary, you get zero stock.

About Options

Incentive Stock Options (ISOs) are called "options" since you have the option of "exercising" (buying) the stock each time it vests.