The Importance of Equity Distribution for Key Employees and the Future of Immortality in Software

The Importance of Equity Distribution for Key Employees and the Future of Immortality in Software

When it comes to building a successful company, one of the key factors is attracting and retaining talented employees. One way to do this is by offering equity as a form of incentive. But how much equity should you give to your key employees? This question has been a topic of much discussion in the business world.

According to James Currier, a managing partner at NFX and a four-time founder, after a seed round, it is recommended to have an employee pool of around 10% to 12%. This allows for the allocation of equity to key employees, ensuring that they have a stake in the company's success. However, the distribution of equity varies depending on the role and level of experience.

For example, a senior engineer can expect to receive as much as 1% of the company's equity, while an experienced business development employee is typically given a .35% cut. Mid-level engineers usually receive .45% equity, while junior engineers and junior positions in marketing or design receive .15% and .05% respectively.

It is important to note that these figures are not set in stone and can vary depending on the specific circumstances of each company. However, they provide a general guideline for equity allocation.

In addition to determining the amount of equity to give, another important consideration is the vesting schedule. Traditionally, employees have had up to 90 days after leaving a company to exercise their options. However, longer vesting schedules are becoming more common. This is because building a successful company often takes much longer than four years, and options are meant to incentivize employees to stay and contribute to the company's growth.

By extending the exercise period beyond 90 days, companies are ensuring that employees won't end up with nothing after leaving. This also helps employees avoid a large tax bill that may come with exercising their options within a short timeframe.

Equity distribution is not only important for attracting and retaining key employees, but it also plays a role in shaping the future of technology. Steve Jobs, co-founder of Apple, once expressed his vision of capturing the underlying world view of geniuses like Aristotle and bringing it to life in a computer.

Jobs believed that by turning the genius' brain into software, future generations could interact with these brilliant minds and seek answers to their questions. While this idea remains a far-fetched dream, it highlights the potential of software to make us immortal in some way.

The concept of capturing the essence of great thinkers and making it accessible through software is fascinating. It opens up possibilities for learning and innovation that were once unimaginable. Although we are still a long way from achieving this vision, it serves as a reminder of the power and potential of technology.

In conclusion, the distribution of equity to key employees is crucial for the success of a company. It not only incentivizes employees to contribute to the company's growth but also helps attract and retain top talent. When deciding on the amount of equity to give, it is important to consider the role and level of experience of the employee. Additionally, longer vesting schedules can be beneficial for both the company and the employees.

As for the future of software and technology, Steve Jobs' vision of capturing the essence of geniuses in a computer reminds us of the boundless possibilities that lie ahead. While we may not be able to achieve immortality through software just yet, it is important to continue pushing the boundaries of innovation and explore new frontiers.

Actionable Advice:

• 1. When determining the amount of equity to give to key employees, consider their role and level of experience. This will help ensure a fair distribution and incentivize top talent to stay with the company.

• 2. Evaluate the vesting schedule for equity options. Consider extending the exercise period beyond the traditional 90-day timeframe to allow employees more time to exercise their options and avoid potential tax burdens.

• 3. Embrace the potential of software and technology to revolutionize industries and shape the future. While capturing the essence of geniuses in a computer may still be a distant dream, it is important to continue exploring new possibilities and pushing the boundaries of innovation.

By implementing these actionable advice, companies can navigate the complexities of equity distribution and leverage the power of technology to drive success and growth.