What does it mean to have equity in a startup?

Having equity means you have a financial stake in a startup. Typically, equity is used to incentivize employees to work towards a common goal, whether that be becoming the next unicorn or being acquired by a major enterprise. CEOs have good reason to offer equity.

How much do successful startup founders make?

Do founders of startups that have raised millions give themselves paychecks? If so, how much money do they pay themselves? Yes, in the US tech startups that have raised money tend to pay their founder CEOs about $130,000 per year.

What are the benefits of equity compensation for startups?

Often this leads to startups hiring junior employees, which then leads to poor performance. Equity compensation allows you to hire senior employees for the cost of junior ones. E.g. at Senstone we hired a $5000/month engineer for $1500/month salary (in Ukraine) Gives a sense of ownership to your team.

How much equity should a co-founder have?

Previously Brad Feld has argued that a founder CEO will be in the 5-20\% range, a founder CTO in the 2-10\% range, other co-founders between 3-7\% and non-founder early employees between 0.5-5\%. Market value for equity is dynamic though and the necessary points to attract an individual employee can vary.

How should equity compensation be viewed in relation to investment?

The key in his approach is that equity compensation should be viewed the same way that you view investment. In other words, the loss of compensation for the early employee as compared to market rate should be viewed as equivalent to the equity for that same dollar amount from an investor.

Should equity compensation for early employees be equivalent to market rate?

In other words, the loss of compensation for the early employee as compared to market rate should be viewed as equivalent to the equity for that same dollar amount from an investor. Logically, that’s correct, but I personally would put a risk premium on equity compensation.