A great question came up recently in discussion with one of First Round's CEOs: how much equity should I allocate for hiring my next round of employees? For a company that has raised a first institutional round of capital, this question is important not only when making competitive job offers, but also when calculating what size option pool the company will need before raising the next round of capital.
Stock option comparables are hard to come by, so I thought I should post what I dug up for our CEO. Here's the best quick and dirty breakdown that I was able to find, courtesy of Venture Hacks - the ranges are from two years ago, but they still seem about right given what I see in the range of cap tables hitting my desk.
"To allocate the option pool from the hiring plan, use these current ranges for option grants in Silicon Valley:
Title Range (%)
- CEO 5 - 10
- COO 2 - 5
- VP 1 - 2
- Independent Board Member 1
- Director 0.4 - 1.25
- Lead Engineer 0.5 - 1
- 5+ years experience Engineer 0.33 - 0.66
- Manager or Junior Engineer 0.2 - 0.33
"These are rough ranges – not bell curves – for new hires once a company has raised its Series A. Option grants go down as the company gets closer to its Series B, starts making money, and otherwise reduces risk.
"The top end of these ranges are for proven elite contributors. Most option grants are near the bottom of the ranges. Many factors affect option allocations including the quality of the existing team, the size of the opportunity, and the experience of the new hire."
If you'd like to get more precise information on total compensation (both cash and equity, by specific title), you can get very robust data from the Radford technical job survey. Survey data is free in exchange for participating in the survey, so you can't beat the cost if you're on a tight budget. If I remember correctly from my own founder days, their 'small company' compensation ranges were appropriate for 25+ employees but a little off-market for a seed company. So if you get hold of a Radford survey, you may want to swing some comp from the cash to the equity side if your startup is still seed-stage.
If anyone else has good comparables to share, please do post them in the comments.
