2019 didn’t herald any major innovations in how early startup employees receive equity. Which is a shame since, on the margins, the most talented hires deserve more of it. On the positive front, I did encounter more founders making early exercise available to their teams and much less resistance overall to the idea of a 10-15% pool (perhaps because valuations continued to increase so founders themselves were taking less dilution in financings). A subset of startups we worked with also made changes to their equity plans which allowed for longer exercise windows in the case of an exiting employee in good standing (usually who have stayed a minimum of two years at the company).
Perhaps I’m just not looking in the right place for changes – it’s more likely the non-venture backed companies that will explore dividends, profit-sharing and other mechanisms for rewarding teams in building an enduring business. For startups like Carta, this looks more like structured secondary programs.
It’s the second time founders – especially solo founders – who often think most deliberately about these issues. They saw how previous outcomes did – or didn’t – reward teams proportionately. They have people in mind they want to pull into their new venture and know often these folks will be leaving money on the table from current gigs. They are often more aware of what their role requires as CEO (and sometimes their own strengths vs weaknesses). And as they’ve articulated to me, rather than have a single cofounder, they’ll take 20% of the company’s equity and provide real incentive to the founding team and early executives.
Did you see anything interesting in 2019?