4 ms·

>Option pools are complete fiction; boards can increase them whenever they want. It should never be used as a reason for not making a grant. Is this true? I h

>Option pools are complete fiction; boards can increase them whenever they want. It should never be used as a reason for not making a grant. Is this true? I had one startup say they couldn't increase the equity portion of an offer because they'd have to go to the board and the amount of equity they had available was already set. Didn't heard a word about dilution there. Haven't heard what the other stories were/are yet.

doublerebel 11y ago
Both are true. (Generally) The percentage of equity dedicated to ESOP is fixed unless the board has a good reason to change it. Since increasing the ESOP causes dilution, it would be hard to argue for an increase just to hire a single employee. However, some dilution can be good for everyone. Wealthfront and others have described such a plan: https://blog.wealthfront.com/the-right-way-to-grant-equity-to-your-employees/ https://blog.wealthfront.com/the-right-way-to-grant-equity-t...
- hitekker 11y ago
  Thank you for the informative reply. Have an upvote!
- kriro 11y ago
  """it would be hard to argue for an increase just to hire a single employee.""" For a lot of tech startups hiring a single employee is actually a big enough deal in most cases to try and argue for it (imo)
  - doublerebel 11y ago
    Sorry, most boards and most companies don't value employees that highly, which is why this post and discussion are still happening. YC companies are outliers and boards at YC companies are more likely to be better informed and closer to the employees of the business. For most boards and investors, they will focus on the numbers on the spreadsheet unless the potential hire is quite exceptional.
- shubhamjain 11y ago
  > Since increasing the ESOP causes dilution, it would be hard to argue for an increase just to hire a single employee A reason why it is important to choose your investors carefully. A smart diligent investor, should be ok with sacrificing some equity to hire a very good employee who can add immense value to the company.

doublerebel 11y ago

Both are true. (Generally) The percentage of equity dedicated to ESOP is fixed unless the board has a good reason to change it. Since increasing the ESOP causes dilution, it would be hard to argue for an increase just to hire a single employee. However, some dilution can be good for everyone. Wealthfront and others have described such a plan: https://blog.wealthfront.com/the-right-way-to-grant-equity-to-your-employees/ https://blog.wealthfront.com/the-right-way-to-grant-equity-t...

hitekker 11y ago
Thank you for the informative reply. Have an upvote!
kriro 11y ago
"""it would be hard to argue for an increase just to hire a single employee.""" For a lot of tech startups hiring a single employee is actually a big enough deal in most cases to try and argue for it (imo)
- doublerebel 11y ago
  Sorry, most boards and most companies don't value employees that highly, which is why this post and discussion are still happening. YC companies are outliers and boards at YC companies are more likely to be better informed and closer to the employees of the business. For most boards and investors, they will focus on the numbers on the spreadsheet unless the potential hire is quite exceptional.
shubhamjain 11y ago
> Since increasing the ESOP causes dilution, it would be hard to argue for an increase just to hire a single employee A reason why it is important to choose your investors carefully. A smart diligent investor, should be ok with sacrificing some equity to hire a very good employee who can add immense value to the company.