How to allocate stock to founders and other early team members by Mark Medearis

Allocating ownership of a startup at the very beginning can be challenging due to uncertainty regarding future value and roles and contributions of early team members. Establishing clear roles and expectations, as well as working backwards from a forecast are ways to deal with this uncertainty

  • How helpful? Scale of 1 to 5

5.

  • Topic Tags

Founder stock, early employees stock, founder control, governance,

  • Relevant questions addressed

How can founders allocate stock to themselves and other early contributors?

  • Summary bullet points
  • Uncertainty around future company value and early team members’ future contributions make it hard to assess what future value is being given away when allocating early stock
  • Relative ownership among founders should be discussed, considering their roles early on, near-term, and long-term. This can help set goals and expectations too.
    • Lawyers can help in this by providing aggregate data on other startups
  • Grants to early contributors and founder ownership should be discussed with future financing in mind
    • Founders can forecast a few years into the future to when financing rounds and option pools will have diluted their % ownership and work backward
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