How Much Equity Should I Give My First Employees?

Brady says there is no exact formula for setting employee equity. Early hires should generally receive more than later hires because they face greater uncertainty and a more demanding work environment.

Startups traditionally reserve 10% to 20% of company equity for employees, and venture capitalists may require a pool before investing. Senior external hires can use a substantial share: Brady gives rough examples of 5% for a CEO and 3% for a CTO or COO. He recommends estimating future hiring needs before making the first grant.

Brady gives 1% to 2% as a traditional range for a first employee, often an engineer in a Silicon Valley startup; broader online estimates range from 0.5% to 3%. The grant depends partly on available cash and whether the employee values equity or salary more. A more risk-averse hire may prefer higher salary and less equity.

Most startups fail, so Brady advises treating equity as a way to improve the company’s chances rather than as a fixed pie to divide. Early employees work closely with founders and help shape the outcome. He says he has not met a successful entrepreneur who regretted being generous with early employees.