Tim Brady - How Much Equity Should I Give My First Employees?

Tim Brady explains how much equity you should offer your early employees. Tim is a partner at YC and was a Co-founder and Partner at Imagine K12. Formerly CEO at QuestBridge and Chief Product Officer at @yahoo.

[tjsmind]

Y Combinator is doing amazing work by releasing all this free content and democratizing entrepreneurship education. Bravo!

[mosesnandi]

This piece is golden: "Just remember, the vast majority of startups fail and only a very very small percentage become big financial successes. So I encourage you when thinking about equity is ...don't think of it as a fixed pie which is meant to be divided but rather as a tool that's going to increase your chances or your likelihood of being one of those few big financial successes"

[saltfarming]

"I have yet to hear someone say they were too generous with their early employees" 10/10 talk

[SuperKillaki]

This the gem you have to wait an hour for to learn on clubhouse... after “30 second introductions”

[davidalbers]

I have an interesting question for debate. To be clear, I obviously think that generosity to first employees is by far the best way to approach building a company for a number of reasons... BUT the question stands: When you say that you haven't met a successful founder that was "too generous" with early employees(4:22), is this because of "survivorship bias"? Wherein the successful founders weren't generous enough and that may have actually been a contributing factor to their success?

Would love to hear some perspectives here.

[metaversenft]

Brilliant, short, valuable, thanks guys!

[ekrystale]

This is so insightful. I mean hours of research wrapped in less than 5minutes.

[queenbee]

I am considering giving some of my equity to my early employees but weren't sure how much to give. Your video was informative, thanks a lot.

[ivigeeservicesa.s.]

Thanks for the Video and much appreciated! Will be chatting to my team about this...actually showing this exact video to them tomorrow morning! And Go WoodLand School Tim...Ladera oldschooler here:)

[guangzhoutianhe]

wow, it's very useful and truthful since Tim's background. also, Can you give us some advice on how to deal with the equity of employees after they leave? Thanks.

[rudhisundar]

He has scar tissues and it is clearly visible. Thank you for these golden pieces of advice.

[jordanstewart]

As an early employee for a startup here is a simple equation I wish someone told me with balancing opportunity costs with pay:
risk of success * equity + income at startup > income you can earn elsewhere

eg. if you can earn $150k elsewhere, and the start up offers $200k equity a year, and an income of $100k. The success rate of a start up is about 1/9, or it could have already found a market.
1/9 * $200k + $100k > $150k income at some company
equals $122k > $150k don't work for the startup.

You also need to consider it's painful working on a reduced wage. You might not be able to cash out your equity. The failed startup would look worst on your CV.

There is a much bigger lifestyle difference between a salary of $60k and $70k, than $120k and $150k.

[_luka_bagdavadze]

What happens to employ 5% when we go to seed round and sell 10% of the company? Do they still have 5% or their equity gets reduced to 4.5%?

[Fedkar]

This is only a theory. Maybe in Silicon Valley it works better. It does not work in Eastern Europe at all.
I was very generous with the first employees in my startups, 3 of them. Maybe even too generous. Equity + salary. Non of them appreciated this, they all (!) of them were working their 9 to 5 job without expected dedication.

[oscaralonsodelgado]

What I don't really get yet is when they talk about employee before giving shares, it means they're already getting paid?

[suleimanpeshawari]

Not to mention people get crappy salaries at early stage startups, so they better cough up equity

[ikengaokwute]

how much do you have on hand (giggle) . i just had to laugh but this is good information

[ahsanmohammed]

How much equity should I give to someone building my product from scratch for free?

Thanks.

[ReflectionOcean]

By YouSum Live

00:00:32 Early employees deserve more equity for risk & effort.
00:01:18 Startups allocate 10-20% equity for employee incentives.
00:02:43 Consider cash availability & employee's equity value.
00:04:00 Equity is a tool to enhance startup success.
00:04:05 Early employees need strong ownership for startup success.

By YouSum Live

[dosesandmimoses]

Free content? This is what school and ethics used to do.