The Median First Engineer Equity Grant Is 1.54 Percent

Founders - how much do you pay your founding engineer in equity?

Here's what we know:

• Over the past 2 years, the median equity percentage granted to the first engineer at a tech startup was 1.54% — so 1% is on the lower side, actually.

• However the middle range (from the 25th to the 75th percentile) for equity to the first engineer is rather wide. On the low end you've got 0.61% of the company, on the upper end 4.13%.

• Equity for the next few engineers falls over pretty quickly, with the median dropping from 1.54% down to 0.61% after just 2 hires.

• Engineers still dominate the first 5 hires at tech startups. Something like 70% of all first hires are engineers and at least 45% of the first 5 hires are eng.

So that's what we know, here are some scattered, data-informed opinions of my own:

• There are ways beyond the actual percentage to make this equity more valuable to early employees. Early exercise (if granted as options) is one. Giving the first few employees Restricted Stock Awards (RSAs) instead of Incentive Stock Options (ISOs) is another.

• Vesting is still 4-year, 1-year cliff almost always. Is it time to experiment with different vesting schedules?

• I kinda expected these equity values to get bigger over the last couple years, but they really haven't budged much. I think some of that is founders hiring their initial team later in the journey than they used to (and fewer employees overall at nearly every stage).

• Sometimes companies are getting super high valuations very early on in their lifecycles. This will impact the fair market value of the options. Slightly hidden (potential) downside of super high valuations at the beginning.

Hope this helps folks hire some cracked engineers 🙏