Slicing Up the Equity Pie

Here in the US, it's Thanksgiving, and let's be honest: the best part of the meal isn't the turkey—it's that big slice of pumpkin pie loaded with whipped cream at the end.

‌

What's better than pumpkin pie? Equity pie, obviously. But slicing that equity pie to make sure everyone gets a fair share can be tricky. You want to make sure the slices are big enough that everyone feels valued, while also leaving enough for future rounds (and eaters).

So: how much of your tasty equity pie should you set aside for your ESOP?

The data says 8 to 10 percent is a good starting point. If you granted everyone the median option grant, 8 percent should get you through your first 50 employees, which is about where most companies land by Series B.

At the 75th percentile, 10 percent will get you comfortably through Series A. And if you're on the most generous end, the 90th percentile, that 10 percent will last you until your Seed funding, maybe even up to employee nine or ten.

Investors are going to encourage you to set aside large slices early, but remember, you can always add to your ESOP before your next round if you need to.

Happy Thanksgiving from all of us at Carta! We're grateful for all of you who subscribe and read us week after week.

Subscribe here if you're new to the Data Minute. Forwarding encouraged!