Your ESOP plan requires wise management and clear thinking. An important consideration is how much ESOP to allocate to new staff. Fred Wilson from Union Square Ventures covered this in his classic 2010 post (https://lnkd.in/ds-fHYH). As he explains it, the golden rule once you have a few staff on board is to never talk about percentage points; always refer to ESOP in dollar value.

Recently Matt Cooper from Skillshare has built on Fred’s work with an excellent explanation of the key techniques they employ to determine how much ESOP to allocate to new and existing staff based on their function within the business. He also explains their thinking about refresh grants and he links to the spreadsheets they use when determining these metrics.

As Cooper says: ‘think of your cash comp as reflective of the value [employees] are bringing day-to-day and equity grants as a reflection of how they will impact the value of the business over the long-term’.

The data provided needs adjustment for the Australian and NZ market and should ideally reflect a three-tier ESOP offer model given not all staff value equity in the same way (we’ve written about this previously here)