How should an early-stage startup allocate equity grants to key early employees from an option pool?

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Accepted Answer

Well . . . "it depends" is definitely the right answer, but “it depends” is also lazy. Here’s a real starting range: to start, set aside ~10–15% for the option pool, and this is a post money pool (as are these grant sizes). (Don't promise someone a specific percentage, and then dilute tham by 20% a few weeks later when you raise.).

Typical grants: first non-founder exec (COO/CTO if not a cofounder) 1–3% (rarely 4–5%); other VPs 1%; senior engineers/PM 0.2 - 0.5 %. Early sales get small grants since they usually have much larger cash compensation via commission.

But it really does depend. It depends mostly on what the RISK looks like. If you and your cofounder have already built the product; have customers, revenue and traction: and your currently just accelerating you're going to be at the low end of the scale.

If the risk is high because most things are unproven, you're going to be at the higher end.

My final advice is don't be cheap. What you want to do is use whatever "currency" you have more of. If you have lots of cash and can pay at or above scale, you can provide less equity. But if people are essentially working for free, then you better pay them off the charts high. (And no whining about it).

Lastly, it depends on your product. To get an A level AI engineer, you're going to have to be at the very high end - and very persuasive.

Good luck!