This Week in Startups Stock option grants deep dive with Becki DeGraw | Wilson Sonsini Startup Legal Basics
Mar 18, 2021
Join Becki DeGraw, a savvy attorney at Wilson Sonsini focused on startup legalities, as she unpacks the intricate world of stock options. Delve into the pros and cons of equity compensation and how it can attract talent even with lower salaries. Learn the nuances between preferred and common shares, and discover the impact of 409A valuations on stock prices. Becki also clarifies the differences between ISOs and NSOs, while emphasizing the critical need for precision in startup operations. Don't miss these essential lessons for navigating the startup landscape!
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Equity as a Pie
- Startup equity is a pie, with founders initially holding the majority.
- A portion (10-20%) is reserved for future employees/advisors, diluting existing stakeholders pro-rata when issued.
Use Precise Share Numbers in Offer Letters
- In offer letters, use the precise number of shares when granting stock options.
- Avoid using percentages, as they can create ambiguity regarding the total shares.
Standard Stock Option Grant Structure
- Standard stock option grants typically have a 4-year vesting schedule.
- They include a 1-year cliff, meaning no vesting occurs during the first year.