Asher Siddiqui’s Post

Navigating equity compensation for early employees can be challenging for startup founders. After unsuccessfully searching for an approach we felt comfortable sharing with founders, we decided to create one ourselves. Today, we're excited to share a new framework to make sizing equity grants easy and transparent for founders. In this post, we cover: -🔍 Key questions to ask when creating early equity grants -📊 Important definitions and concepts -💡 Guidelines for equity allocation, including multipliers, premiums, and discounts -📈 Tips for managing equity as your company grows -🧮 An easy-to-use equity calculator to perform this exercise on your own Whether you're a Pre-Seed, Seed, or Series A founder, this guide will provide you with the information needed to confidently make informed decisions about equity grants for your team. https://lnkd.in/gji_pU6s

We’re building out a founders guide with helpful answers to the questions we get all the time from founders. Today, Matt Birnbaum published a guide on how to structure equity for early hires, complete with a calculator to make it easy for you. Founders: don’t miss this one.

Insightful read re: employee equity!

Do you hate waiting for your equity to vest over four years? Even the equity of founders vests over time! Why? Imagine one out of two co-founders leaves after a year. If they retain their entire stake, the remaining founder would have no equity to bring in a new partner. The departing founder would also receive all the benefits of the company's future growth without contributing as much effort as the remaining founder. Many investors also insist on vesting of founders' equity. How does vesting happen? There is no fixed vesting criteria. Their vesting schedule might be the same as the standard ESOP vesting - 25% at the end of the first year, 1/48 every subsequent month over three years. Or, they may start fully vested but give the company buyback rights in case of their early departure. I've also seen eight-year vesting periods for founders of billion-dollar startups! How is it different from employee’s vesting? The primary difference between employees and founder vesting is that the founders have triggers for full vesting, called acceleration clauses. If the startup is acquired, IPOed, or the founder is terminated without cause, their entire unvested equity gets vested immediately. So, whether a founder or an employee, everyone has to wait for their equity to vest.

Most startup founders don't have any interest, knowledge or experience in accounting. Therefore, it's not surprising that so many early stage companies struggle or straight up fail when it comes to their first accounting & finance hires. We teamed up with Furey to provide some much needed guidance on how to approach those critical hires in order to position your startup for financial success, especially when it comes time for that next fundraise.

Pre-seed & seed-funded Founders, do you know how to (competitively) benchmark employee equity? As an early-stage Founder, you need to attract critical hires by offering a competitive package without pushing your capital limitations. Generally speaking, there are 3 ways to figure out how much to offer… 1️⃣ Use equity to fill the gap between the market salary and the salary you can afford by taking the employee’s potential earnings and calculating what an angel investor would want for the same “investment”. 2️⃣ Make sure the potential return you’ll gain from onboarding the employee exceeds the dilution their equity grant will incur. (This is Paul Graham’s “Equity Equation”). 3️⃣ Use crowdsourced insights (e.g. Index Ventures’ “Rewarding Talent”) to evaluate what similar companies have offered. BUT, always lay your budget over crude benchmarks. There’s no “right” answer - the best technique would be one tailored to your specific circumstances (or a combination of multiple methods). But this should give you a place to start. Want to learn more about these approaches? I’ll leave a link to Spela’s deep-dive article in the comments 😀 #EmployeeEquity #Seed #Founders #Benchmarking #Startups

As presented in our US Startup Salary Guide, there's been a notable shift in the dynamics of CFO salaries, particularly at early-stage ventures📊 While CFOs have traditionally been highly compensated, there's a growing recognition of the broader remit and responsibilities shouldered by VPs of Finance in early-stage startups, leading to increased demand and compensation 💸 Meanwhile, controllers have emerged as indispensable players. Their role in cash control and management is pivotal, ensuring the financial stability and prolonged runway for startups. Understanding these trends is crucial for both finance professionals and startup leaders. If you want to learn more you can download our guide and watch our launch event for further details ⬇️ #financesalaries #cfosalary #compensationandequity

Ever wondered how startups and innovative companies retain top talent? 💼 Say hello to "Vesting Equity"! 🌟 Let's dive into this fascinating concept 👇 #VestingEquity #StartupCulture 1️⃣ What is Vesting Equity? 🤔 It's a process where individuals earn ownership of company stock over time, not all at once. That means, an individual will earn their share of the company gradually as time goes on. For example, getting it over a period, like monthly or yearly. This way, they're motivated to stick with the company for the long run and grow together! 2️⃣ Here's how Vesting Equity works: When you give someone ownership in your company, there's a waiting period called the "cliff" (about one year), and then they earn a little bit of ownership regularly (every month or quarter). Once the schedule is done, they have full ownership. 3️⃣ The key goal of Vesting Equity is to encourage long-term commitment and align interests. When employees have a stake in the company's success, they're more likely to stay dedicated and work towards shared objectives. 💼💪 4️⃣ It's essential to know the terms of the vesting agreement. If someone leaves the company before the vesting period is over, they might lose some of their promised ownership in the company. So, staying committed can lead to better rewards in the future! ⏳ 5️⃣ Whether you're a startup founder or an ambitious professional, vesting equity can be a game-changer in shaping your compensation package and career trajectory. It's a win-win for both employers and employees! 🚀 When companies thrive, so do the individuals who contribute to their growth. #SuccessFormula #StartupWorld #AfricanStartups #Raise Want to learn more about ownership structures? Register for Raise Equity Clinic sessions: https://hubs.la/Q01-m2RY0

The craziest stat nobody is talking about: New hire equity offers are down 36%(!!) from November 2022. Why? 1) Startups haven't refreshed their employee stock option pool, and 2) candidates don't have leverage (eg competing offers) to negotiate for more. It gets worse if a company hasn't reset its valuation since the ZIRP days. Not only are equity offers 36% lower, the valuation of the company is not marked to the current market reality. So you're fewer shares at a share price that doesn't make sense. Many people made life-changing money on startup equity from 2010-2022. It's much harder to find that alpha in today's world. Thanks for the incredible insights, Peter Walker.

If tech company founders are successful in their ventures, it’s inevitable that the sale deals will come knocking. But are they adequately prepared to make an exit? In our newest #whitepaper, we will explore the several factors tech founders need to keep in mind when seeking to exit their ventures. Read the article here: https://lnkd.in/eamXczWY #NewEdgeWealth #Onward