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

Summary

The video discusses how much equity should be given to the first set of employees in a startup. The speaker provides two rules of thumb: early employees should receive more equity than those who join later due to the higher risk and effort involved, and startups typically set aside between 10 and 20 percent of their equity for employee incentives. The speaker also mentions that outside CEOs and CTOs typically receive around 5 percent and 3 percent of the company's equity, respectively. The first employee usually receives between 1 and 2 percent, depending on factors such as available cash.

Tim Brady, a partner at Y Combinator, discusses how much equity to offer early employees. He suggests considering a trade-off between salary and equity, as some employees may be willing to accept lower salaries in exchange for more equity. It is important to understand how much value the potential employee places on equity, as some may prefer the security of a salary. Brady advises using a combination of higher salary and lower equity to motivate employees who value salary more. He emphasizes that most startups fail, so it is crucial to view equity as a tool to increase the chances of success. Early employees should have a strong sense of ownership and play a significant role in the company's outcome. Brady recommends being generous with early employees to build a successful startup.

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