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Why Should You Be Generous With The Equity You Give Your Team?
A few years ago, I was in the first board meeting for a startup that just closed its initial venture funding. The company’s founder, “Ray”, had been working with me since the company’s inception, and he asked me to be on the board.
At the end of the board meeting, there was a discussion about setting the exercise price for stock options. One of the new investors, “Larry”, said, “We should set the stock price as high as possible, so anyone who quits won’t exercise their options.”
I groaned my disapproval.
Being generous with your team costs you very little.
I spoke up and said, “That’s not what I would do, and that’s not what I did when I was running my company.
“I think we should set the exercise price as low as possible because we have an obligation to look out for the employees. How long is it going to take for this company to be liquid? Seven years? Ten years?”
Larry was burning a hole into my head at this point with his eyes. He was clearly pissed.
I continued with my thoughts.
“If we show generosity with the employees, anyone that leaves the company will feel good about their experience working with us, and they’ll say…
