Summary: <br> “If you’ve got a dream and your dream doesn’t require a team, you need to dream bigger.” — Unknown<br> When working with startups (both as an investor and advisor), I like to focus on incentivizes. The more aligned your organization is, the better the performance will be.<br> Commissioned sales people are hustlers. Ever buy a used car? They do anything to get the sale, but they don’t care about the dealership. The majority of their compensation comes from sales. They don’t get a piece of the bigger pie, so why help other salesmen? It is a bit of a dog eat dog world.<br> The other extreme (Corporate America) is just as bad.<br> If you are working at a startup, you don’t want just a job. Your goal isn’t simply a paycheck and benefits — you want meaning. And upside.<br> Founders are crazy. They have to be to fight to bring something radical new way to the world. And they magnetize others to follow them.<br> But early startup employees are crazy too. They believe in the vision of building something bigger — but they also “own” the company in a sense. This is their baby, they have a stake and they create the culture from day one.<br> But it isn’t all fun and games…<br> <br> A pirate’s life for me?<br> Being a pirate is a lot like joining a startup — a rebel on the high seas setting sail into the unknown in search of treasure and adventure. And the seas aren’t smooth, anything but actually. But the rewards can be life changing.<br> For ships to function, the entire crew must be aligned. Every mate has his (or her) job. Everyone relies on everyone else. There is little room for error, and the opportunities to die are endless.<br> The pirate captain<br> Everyone knows the captain’s in charge — at least that’s the myth. The reality, much like any situation is that leaders succeed (and survive), only when their crew permits it. Too much trouble, running out of food, stock price plummeting… mutinies occur. The collective pick the person most able to help them achieve their goals. If it is not you, you are out.<br> It is a bit like game theory.<br> That is the motivation for this post: the pirate’s riddle. In essence, a captain has 100 gold coins. How does he divide them among the 4 members of crew to maximize his share — keep in mind the majority can throw him overboard if they feel cheated (<a href="http://mentalfloss.com/article/500790/can-you-solve-pirate-riddle" data-href="http://mentalfloss.com/article/500790/can-you-solve-pirate-riddle" class="markup--anchor markup--p-anchor" rel="noopener" target="_blank">here is the riddle if you want to try and solve it</a>).<br> The riddle isn’t important, the consideration of others in the equation, specifically the equity equation is.<br> Startup equity<br> How much is too much?<br> That is the number one question I get from founders. We are hiring a VP of this or a head of that and I don’t know how much equity to give them.<br> <a href="http://avc.com/2010/11/employee-equity-how-much/" data-href="http://avc.com/2010/11/employee-equity-how-much/" class="markup--anchor markup--p-anchor" rel="noopener" target="_blank">Fred Wilson has a great system here</a>, but says<br> “for your first key hires, three, five, maybe as much as ten, you will probably not be able to use any kind of formula”.<br> Alternatively, Leo Polovets of Susa Ventures <a href="https://codingvc.com/analyzing-angellist-job-postings-part-2-salary-and-equity-benchmarks" data-href="https://codingvc.com/analyzing-angellist-job-postings-part-2-salary-and-equity-benchmarks" class="markup--anchor markup--p-anchor" rel="noopener" target="_blank">presents another well thought out, data-supported strategy</a>.<br> <br> At 1–10 person companies, 0.5% — 2.0% is a pretty common range, though some companies fall outside of this range.<br> For 11–50 person companies, 0.1% — 1.0% is typical.<br> For 51–200 person companies, 0.01% — 0.2% is typical.<br> <br>
