How much equity to give early startup employees

Executive overview

Early equity decisions are more art than science — no lookup table exists. The core variables are risk taken, cash constraints, and how much the employee values equity over salary.

Set aside 10–20% of your equity pool before distributing anything. Think through every future hire first.

Equity is not a fixed pie to divide — it's a tool to increase your odds of being one of the rare big successes.

Rules of thumb for allocation

• Early employees take more risk and effort — they earn more equity than later hires
• First employee: typically 1–2% (range: 0.5–3%)
• Outside CEO hire: ~5%; outside CTO or COO: ~3%
• The pool adds up fast — plan the full roster before distributing

Calibrating the offer

• Low cash on hand? Offer less salary in exchange for more equity
• Not every candidate can accept that trade — have the conversation explicitly
• Equity-averse candidates: use lower equity, higher salary to keep them motivated
• The goal is ownership mentality, not a fixed formula

Perspective on equity generosity

• Vast majority of startups fail; equity only pays out in rare successes
• Strong early-employee ownership increases the chance of being one of those successes
• No successful founder has ever said they were too generous with early employees