4 ms·

I know it's a back-of-the-envelop affair, but one thing I'm a bit unclear is that hiring is not done in batch in January. So, how do you separate your stripes?

I know it's a back-of-the-envelop affair, but one thing I'm a bit unclear is that hiring is not done in batch in January. So, how do you separate your stripes? In his example, employee #4 gets 250 shares, while employee #5 gets 50. But in reality, you won't hire the 4 employees at the exact same time, and the next 20 a year later. It will be spread out over time. I'm sure it's possible to think up a more continuous function for spreading the shares with a similar approach. (but I'm wondering if that's not what already happens somewhat naturally with offer negotiations…)

scott_w 15y ago
That's a good point. I suppose one way is to decide on the equity %, as opposed to the share e.g. first 5 employees get 2% each, next 10 get 1% each.
abecedarius 15y ago
Yes, this is what makes me suspect the method hasn't been tested. What companies have tried Joel's advice? How'd it work out?
kgo 15y ago
"You don't have to follow this exact formula but the basic idea is that you set up "stripes" of seniority, where the top stripe took the most risk and the bottom stripe took the least, and each "stripe" shares an equal number of shares, which magically gives employees more shares for joining early." As usual, Joel proposes you use some common sense, instead of trying to come up with some perfect function. The important thing isn't if employee 4 was hired on Dec 31st and Employee 5 was hired on Jan 1st. If Employee 4 was working in your living room and working off his own laptop, and Employee 5 joins when you have a tiny office, provide him with a computer, have comprehensive health insurance, they're in different bands.
- Timothee 15y ago
  I understand that, but the thing is that you don't know in advance when you'll go from your living-room to an office, so what do you do when you hire your first employee? You know she'll be in the first stripe, but since you don't know how many you'll put in that stripe, you can't use the nice formula 10%/n. What I'm saying is that it sounds very nice and fair to engineer-type people. But it also sounds like it only works after the fact. And again, I understand it's not really to be read as a strict formula, but more as something to give you a gross idea of what you're trying to accomplish. But in that case, it's not much different to what's already happening naturally: founders and employees know that the equity offered should reflect how early they arrive in the mix and what they bring to the table. I'm sure you can go in many startups and find the stripes that naturally formed and get something close to that "formula".

scott_w 15y ago

That's a good point. I suppose one way is to decide on the equity %, as opposed to the share e.g. first 5 employees get 2% each, next 10 get 1% each.

abecedarius 15y ago

Yes, this is what makes me suspect the method hasn't been tested. What companies have tried Joel's advice? How'd it work out?

kgo 15y ago

"You don't have to follow this exact formula but the basic idea is that you set up "stripes" of seniority, where the top stripe took the most risk and the bottom stripe took the least, and each "stripe" shares an equal number of shares, which magically gives employees more shares for joining early." As usual, Joel proposes you use some common sense, instead of trying to come up with some perfect function. The important thing isn't if employee 4 was hired on Dec 31st and Employee 5 was hired on Jan 1st. If Employee 4 was working in your living room and working off his own laptop, and Employee 5 joins when you have a tiny office, provide him with a computer, have comprehensive health insurance, they're in different bands.

Timothee 15y ago
I understand that, but the thing is that you don't know in advance when you'll go from your living-room to an office, so what do you do when you hire your first employee? You know she'll be in the first stripe, but since you don't know how many you'll put in that stripe, you can't use the nice formula 10%/n. What I'm saying is that it sounds very nice and fair to engineer-type people. But it also sounds like it only works after the fact. And again, I understand it's not really to be read as a strict formula, but more as something to give you a gross idea of what you're trying to accomplish. But in that case, it's not much different to what's already happening naturally: founders and employees know that the equity offered should reflect how early they arrive in the mix and what they bring to the table. I'm sure you can go in many startups and find the stripes that naturally formed and get something close to that "formula".