Small Business & Startups

Types of Equity Compensation

By March 6, 2015 No Comments
Yesterday I spoke as a panelist for Silicon Valley Bank’s “Equity Compensation Brown Bag” over at Atlanta Tech VillageDevon Wijesingheof Insightpool provided great perspective as a tech company founder on how to use equity to motivate employees. Brian Gordon of DLA Piper did his best to help keep the audience of startups from doing things that would get them sued (along with a whole bunch of other practical advice). Thomas Armstrong of SVB was our ringleader. And I just tried to keep up.
I really enjoy panel speaking. It’s more conversational than a straight up presentation, which is probably why I like it. After the event, a number of the entrepreneurs spoke to me and the other panelists about how they felt like we weren’t able to give them the “formula” for how to divvy up equity and how to choose the right equity instruments. We politely explained that’s because there is no “formula” for this. Equity compensation can be extremely motivational for employees/partners/board members, but it also has a TON of legal, valuation, and tax issues. I’m always a supporter of not overpaying services providers for unnecessary services….equity comp is NOT one of these unnecessary services. Get a pro for this.
I also wanted to leave a few items in this post that I promised to the audience at the event. Below is a quick cheat sheet I give out to entrepreneurs to help them think about different types/characteristics of equity compensation. And here’s a link to Captable.io, the cap table software that I mentioned (FREE killer tool by Eric Reis of The Lean Startup fame). Enjoy!

 

Link to Google Doc

Tax Deadlines to Keep in Mind +
Easy-to-Use Quarterly Tax Estimates Calculator