"Equity Distribution for Key Employees and the Truth About Bionic Reading"

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Sep 17, 2023

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"Equity Distribution for Key Employees and the Truth About Bionic Reading"

Introduction:

When it comes to building a successful company, one of the key aspects to consider is how much equity to give to your key employees. Equity allocation plays a crucial role in attracting and retaining talent, as well as incentivizing employees to contribute their best efforts towards the company's growth. In this article, we will explore the optimal equity distribution for key employees and debunk the notion of Bionic Reading's impact on reading speed.

Equity Distribution for Key Employees:

Determining the right amount of equity to offer key employees can be a challenging task. According to James Currier, a managing partner at NFX and a seasoned entrepreneur, after a seed round, it is recommended to allocate around 10% to 12% of equity for the employee pool. However, the specific allocation for individual employees varies based on their roles and experience level.

For senior engineers, it is common to grant them as much as 1% of the company's equity. On the other hand, experienced business development employees typically receive a .35% cut. Mid-level engineers can expect .45%, while junior engineers and those in junior positions such as design and marketing may receive .15% or .05% respectively. These equity allocations are designed to reflect the value and impact each employee brings to the company.

The Importance of Longer Vesting Schedules:

While it may be tempting to offer employees a shorter vesting schedule for their equity, it is important to consider the long-term goals of the company. Building a successful company often takes longer than four years, and options are primarily used to retain talent and motivate employees to contribute to the company's growth. As a result, longer vesting schedules are becoming more commonplace.

Traditionally, employees had up to 90 days after leaving a company to exercise their options. However, this could lead to financial burdens and significant tax bills for the employees. To address this issue, some companies are now extending the exercise period well beyond 90 days. By doing so, employees have a fair chance to benefit from their equity even if they decide to leave the company.

Debunking the Myth of Bionic Reading:

In a separate study, researchers analyzed data from 2,074 participants to determine the effectiveness of Bionic Reading on reading speed. Bionic Reading is a technique that aims to enhance reading speed and comprehension by using a visual guide to direct the reader's eyes. Surprisingly, the study found no evidence to suggest that Bionic Reading has any positive effect on reading speed.

In fact, participants read, on average, 2.6 words per minute slower when using Bionic Reading compared to traditional reading methods. However, it is important to note that the difference in reading speed was less than 1%. Therefore, the main takeaway from this study is that Bionic Reading has no significant impact on reading speed.

Actionable Advice:

  • 1. When allocating equity to key employees, consider their roles, experience level, and the value they bring to the company. Tailor the equity allocation accordingly to ensure a fair and motivating distribution.
  • 2. Instead of offering shorter vesting schedules, consider extending the exercise period for employee options. This provides employees with a greater chance to benefit from their equity even if they decide to leave the company.
  • 3. While Bionic Reading may not have a significant impact on reading speed, it is still important to explore different reading techniques and find the one that works best for you. Experiment with various methods and determine what enhances your reading experience and comprehension.

Conclusion:

In conclusion, determining the appropriate equity distribution for key employees is crucial for building a successful company. By considering individual roles, experience levels, and long-term goals, companies can ensure a fair and motivating distribution of equity. Additionally, while Bionic Reading may not be a game-changer for reading speed, it is essential to explore different reading techniques to find the one that suits your needs. Keep experimenting, stay informed, and adapt to the evolving landscape of equity allocation and reading techniques.

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