Tim Brady - How Much Equity Should I Give My First Employees?

TL;DR

Equity allocation for early employees is more art than science, with no exact formula. Key rules of thumb: early employees get more equity than later hires; startups set aside 10–20% of equity for employees; the first employee typically receives 1–2% (range 0.5–3%).

Key insights

• Early employees join with higher risk and work in a hectic environment, so they deserve more equity than later hires who join when the company is stable or well-funded.
• An outside CEO typically receives ~5% of the company; an outside CTO/COO receives ~3% — these figures consume the equity pool quickly.
• Before granting any equity to the first employee, founders should map out all future hires and their estimated equity needs to avoid running out of pool.