Engineering Your Start Up

Engineering Your Start Up, by Mike Baird ISBN:1888577916 - 2002

Stock allocation

  • note he assumes there's a single founder (Founding Team) who funds the early operations; then there's a VC "expansion financing" period, and then IPO/acquisition

  • after expansion financing done, stock should be roughly 60% investors, 20% founder, 20% founding team and other employees

    • of that last 20%, there's often a factor-of-10 in portions based on level - e.g. the C Level folks each get 10x what the managers get, who get 10x what any staff get.

So I did a little calculation to see how that works out per person. I assumed core C Level team of 4 (not counting founder/CEO), each having 2 managers, each of those having 4 people.

Tier Num people Shares /person ratio Shares /tier portions Total portion /tier Total portion /person
c-level, co-founders 4 100 400 15.63% 3.91%
mgrs 8 10 80 3.13% 0.39%
staff 32 1 32 1.25% 0.04%
Total 44   512 20%  

I can't swear that's what he had in mind, because he doesn't seem terribly precise/consistent across various parts of the book in distinguishing key founder from CEO from founding team from top-mgmt from middle-management (and I'm not sure how much middle-management there should even be at the VC stage). So my interpretation is that there's a single key founder who is also CEO - he gets the separate 20%; then all the other employees, including founding team, split the other 20%.

Oct'2010 - Fred Wilson on dilution of Employee Equity.

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