An Introduction to Stock and Options

by David Weekly

To walk through a specific example, let’s say you’re hiring your fifth employee, a senior engineer. (Seniority in this case should be more closely proportional to relevant raw skill than years worked.) Your company has raised $300,000 in seed financing from some angels and your product has just launched in public beta, though is pre revenue. Sheila has a relatively extensive network and some basic management experience. You don’t want to hire her directly into a VP/Engineering role but think she might be able to grow into it. Sheila is still paying off student loans, though, and will need to be paid at least $85,000/year while you and your other engineers are earning $60,000/year (the baseline for Basic Valley Survival Pay). The last engineer you brought on board, Fred, was quite junior but is turning out well - you gave Fred a 3% grant, but that was before you had shipped your product to critical acclaim. My advice in the above case would be to make a grant of 2% with a supplementary 1% grant at the point in time you do decide to make her VP/Engineering.