How to structure startup equity for early hires

As a member of the Talent team at Pear, one of my primary responsibilities is assisting early-stage founders with their first hires. Each month, we receive dozens of inquiries from founders about how to best structure equity compensation for their first hires. Although there is a wealth of information available on this topic, we have yet to find a resource that effectively answers the crucial question:

How much equity should I grant my first employees?

In this post, we aim to demystify the decision-making process around equity grants for early employees and provide a practical, transparent approach for founders to use.


Benchmarking data, the most common approach founders use to determine equity compensation, is inherently flawed. It often relies on a small data set, leading to comparisons with only a few data points. It also fails to capture context, reducing the decision to a handful of variables like role, level, funding, valuation, and team size, resulting in a one-size-fits-all approach. While benchmarking data can be a helpful tool to understand the competitiveness of an offer and provide another data point to aid your decision-making, we find it is often inaccurate, especially for early-stage equity data.

To make it easier for founders, we’ve developed our own approach to equity management for early employees that captures many of the nuances missed by other methods. We refer to this process as “building an equity budget.”

Core Inputs

To start building your equity budget, you’ll need to answer the following questions:

  • Equity Set Aside: How much equity have you set aside for employees in your most recent raise?
  • Hiring Plan: How many people do you plan to hire between now and your next raise? This can be a rough estimate, but the more accurate you are here, the more precise the budget.
  • Position Breakdown: What specific positions are you hiring for, broken down by role type (technical or non-technical) and seniority level (senior, mid, or junior)?*

*The simplicity in role definition and leveling is intentional. We believe that a narrow and flat organizational structure is best suited for companies at an early stage.

Important Definitions & Concepts

Options Pool or Employee Equity Set Aside

It’s common for early-stage companies to set aside about 10% of shares for their employees during the fundraising process. Your employee options pool (ESOP) represents the maximum percentage of new ownership, or the number of shares, you can issue via new hire grants or refreshers to new or existing hires without further dilution. While the exact percentage you set aside will vary based on agreements with your investors, once you decide on an amount, you should avoid exceeding it.

If you haven’t raised a priced round, we suggest setting aside a certain amount of equity that functions as an ESOP, even if it’s not technically written into your agreement.

There are many excellent educational resources on Option Pools for founders. This is one of our favorites.

Managing to a Budget

You should view your options pool as your maximum, not target, spend. Similar to managing cash burn, your goal isn’t to spend this down to zero. 

We recommend setting aside a percentage of your options pool as a buffer, typically between 25-35% of the total pool. This ensures you don’t exceed your allocated resources and provides flexibility if you need to hire more aggressively or at a higher seniority level than initially planned.

Equity Allocation Guidelines: Multipliers, Premiums, and Discounts

When it comes to determining equity grants for your early-stage employees, it’s crucial to navigate through a landscape of multipliers, premiums, and discounts. Let’s break down these guidelines:

  • Timing Matters: Your earliest hires deserve a larger slice of the equity pie. As you bring on subsequent team members, it’s common for their equity to decrease by 20-50% with each new addition. 
  • Technical vs. Non-Technical: Technical hires often command larger equity packages compared to their non-technical counterparts. Typically, equity packages for non-technical hires are discounted by 50% compared to their technical peers.
  • Junior vs Senior. Senior hires should receive more substantial equity grants compared to junior-level hires. As a rule of thumb, if equity for a junior-level hire is 1x, a mid-level hire should be 5x, and a senior hire 10x.

While these guidelines offer valuable insights, every startup is unique. You should feel empowered to tailor how you allocate equity to suit your company’s specific needs and values, but be mindful that deviations can significantly impact your equity budget.

How it works

To establish a starting point for equity grants, we recommend using 0.75% as the “baseline grant” for your first hire. This percentage represents the equity grant for a technical, mid-level employee and serves as a reference point for your future calculations. A .75% equity grant for a mid-level technical hire is consistent with market trends, based on real offers from our founders and further validated by commonly used benchmarking data.

Using the the table below, we now have the information we need to determine what size grant each hire would receive:

Discount per Hire20%
Role Multiplier
Level Multiplier

All values can be changed to align with founder preferences. However, the numbers above are considered standard and we recommend you start with similar numbers even if you end up changing them later.

Let’s assume you plan on making 3 hires in your first 6 months after raising your Seed round. 

  • Hire #1: Senior Technical
  • Hire #2: Senior Technical
  • Hire #3: Mid Non-Technical

Using the tables below, you can easily calculate what your equity spend would be in your first 6 months. 

Equity for Hire #1: Senior Technical
RoleLevel% After DiscountBaseline Grant #1Role Multiplier Level MultiplierEquity Grant
Equity for Hire #2: Senior Technical
RoleLevel% Post Hire DiscountBaseline Grant #2Role Multiplier Level MultiplierEquity Grant
Equity for hire #3: Mid Non-Technical
RoleLevel% Post Hire DiscountBaseline Grant #3Role Multiplier Level MultiplierEquity Grant

Your total equity spend would be 2.94% which leaves you with a little over 60% of your available equity pool left to spend on your remaining hires.


Startup Equity Calculator for Early Hires

To help illustrate this approach even more clearly, we’ve built a calculator you can use to perform this exercise on your own. 

Final Notes

  • For growing companies, the primary constraints on equity grants are the size of the options pool set aside for employees and the number of hires a company plans to make. For example, if Company A plans to hire 10 employees and Company B plans to hire 20, but both have the same size options pool, Company B will have less equity to allocate per employee.
  • Companies with significant hiring plans (greater than 10 hires) should establish a minimum baseline for equity grants. This approach is reflected in the “Min Baseline Equity” section of our calculator. It ensures that equity grants do not fall below a certain threshold, counteracting the rapid decrease in baseline equity from Hire 1 (0.75%) to Hire 10 (0.10%). The figures shown in the example above assume a 20% decrease in the baseline equity grant with each subsequent hire.
  • Upon reaching Series A, companies often move from the “Discount Per Hire %” approach to a standardized system where all employees in the same role and level receive equal equity grants. For Series A companies, we suggest resetting the baseline equity grant for a mid-level technical hire to 0.075%.
  • Many candidates at this stage expect grants that fall outside typical ranges. Running candidates through this exercise can provide them with the context needed to better understand the size of their grant.
  • Most importantly, we recommend doing whatever is necessary to close the right talent, flexing where needed to hire outlier candidates. This post about Minimum Fundable Teams captures some of our thoughts on why the right team is so important. 

We hope you found this resource helpful. Visit our Talent Services page to learn more about our team and the work we do to support founders.

Celebrating 100 hires for Pear companies 🥳

Last February, we introduced Pear Talent Services to the public. At the core of our announcement was our promise to directly hire the most crucial talent for our founders—a commitment we extend to every company we invest in. Today, we’re thrilled to announce that we’ve made 100 hires for our founders, marking a significant milestone in our journey.

To mark this occasion, we wanted to share a few trends that emerged from our initial 100 hires.

We specialize in supporting early stage companies and the distribution of hires reflects just that.

The vast majority of hires made were technical, particularly founding or early Engineers.

75% of hires came directly from other tech companies. 

21% of hires attended either Stanford, CMU or Berkeley.

Hiring has shifted back to in-person or hybrid roles, with only 25% of positions being remote.

If you’re a founder interested in learning more about our Talent Service offering, click here.

Minimum Fundable Team: how early team shapes seed fundraising

My role at Pear is to directly support pre-seed founders that participate in PearX with their hiring needs. PearX is our hands-on, 14-week bootcamp designed to position founders to raise seed rounds from top tier investors. We’re experts at helping companies raise this capital; over 90% of PearX companies go on to raise capital from top investors.

We have found, that at early stage, the four largest themes driving an investor’s decision to invest in a company are:

  • Market
  • Product
  • Traction
  • Team

To successfully raise capital, you need all four to be great OR one or two to be exceptional

However, at pre-seed in particular, markets are difficult to size and product or traction are often still too early to measure with a high degree of conviction. For these reasons, investors will often place an outsized emphasis on the quality and completeness of the team when making an investment decision.

At Pear, we refer to the completeness of a team at this stage as Minimum Fundable Team or MFT.

Prior to raising a pre-seed or seed round, founders should ensure their MFT is a competitive advantage. We suggest that all founders ask the following three simple questions to determine the completeness of their team prior to raising:

1. Is someone on the team a deep subject matter expert with the market or product you’re building?
2. Has someone on the team built a successful product from zero? 
3. Do you have the right mix of skills across the team required to ship a quality product quickly? 

If the answer to any of the questions above is no, what steps need to be taken to fill in any gaps to achieve MFT? 

We believe that hiring is one of the best ways to do this quickly. 

One of the advantages of joining PearX is that helping founders achieve MFT is a core part of our offering. Over the last 12 months, I have worked with 30 different teams and helped fill over 25 roles. Each of these hires have played a critical role in helping those teams reach MFT and close a successful round of funding. 

If you take away one learning from this article, it’s that hiring plays one of the most critical roles in early stage fundraising. Founders who achieve MFT prior to fundraising will have a higher likelihood of success compared to those who don’t.

Welcoming Arpan Shah as Pear’s newest Partner

We’re excited to announce that Arpan Shah will be Pear’s newest Partner. A Visiting Partner for the last year, as well as former Robinhood founding engineer and founder of Flannel (acquired by Plaid), we couldn’t be more thrilled to have him permanently onboard. 

An alumni of Pear Garage, Arpan has always embodied the people-first Pear ethos and now follows the operator-turned-investor journey. He will continue working on investments in his wheelhouse of Fintech, developer tools as well as data platforms and AI. 

“I’m excited to find companies that have more innovative approaches that are both scalable and cost efficient in this world where more and more data will be used in more and more interesting ways.”

As a Visiting Partner, Arpan has supported portfolio companies at the intersection of Fintech, AI and Data. He’ll continue providing his expertise with PearX for AI (the first cohort of which is still open for applications).

“I really like working with founders who are trying to build companies that seem ridiculously hard. Those are the types of founders that I think are quite exciting, because they’re really motivated to not pursue small wins, but really make transformational change happen in an industry.”

Sound like you? Email him at

The only talent offering in venture built for founders

In the months immediately following a fundraise, even the best founders struggle to hire. The difference between making the right hire and doing it quickly is often the difference between building a successful company and failure. As part of Pear’s seed platform, we’ve built a founder-first talent service to ensure that all of our companies have the highest chance of success.

These days, having a talent partner in venture capital is almost a given. Despite the prevalence of talent teams in venture, there remains a massive disconnect between what founders need and the services talent teams provide. The majority of teams are either too small to make a meaningful impact or unable to support the diverse talent needs across early and late stage companies.

This puts talent teams in a difficult position, forcing them to decide which founders receive support and limiting the type of support they offer. There’s a chasm between what founders truly need and what talent teams are able to provide, greatly reducing the impact of the support they offer.

At Pear, we’re determined to bridge this gap. Over the last 12 months, Nate (Meta, Uber) and I have been quietly piloting an in-house talent offering that directly addresses the shortcomings of the current venture talent model. With the recent additions of Maryna (Plaid, Neuralink, SpaceX) and Laura (Brex, Afterpay, Uber) to our team, we’re excited to officially launch our one-of-a-kind talent service, designed to directly address the most critical needs of our founders.

1. We’re early-stage specialists and early-stage specialists only. 

We focus solely on early-stage startups. We don’t pick and choose who we support. All of our founders receive the support they need from a talent team with deep expertise in the space.

2. We’re committed to making the first hires for our seed companies. 

We believe that simply making candidate introductions and giving advice is not enough. The only metric that really matters to founders is hires. That’s why we are committed to making the first hires for our seed companies.

3. We’re hands-on. We’re in the trenches with our founders.

We’re a hands-on talent team that works closely with our founders. We won’t just stop by to offer advice— we’re involved in the hiring process from start to finish, acting as the internal recruiting partner until our founders are ready to hire on their own.

4. We teach our founders how to hire for themselves. 

We aim to help our founders build a strong hiring foundation ensuring they have the necessary tools and skills required to maintain success in the long-term. Helping founders hire is important, but it means nothing if they can’t do it on their own later on. 

5. We do it for free.

We believe helping founders hire is a core offering that all VCs should provide. Our talent services are built into our DNA and are always free for our portfolio companies.

What’s next?

Beginning this year, all seed companies we invest in will have access to Pear’s talent support. The best companies are built by the best teams. By directly helping our founders make their first hires, we increase the chance of their success. 

Our goal at Pear has always been to help founders build incredible companies, and we’re proud to be doing just that.

15 Mistakes Startups Make When Building Their First Engineering Teams

This is a recap of our discussion with Pedram Keyani, former Director of Engineering at Facebook and Uber, and our newest Visiting Partner. Keep an eye out for Pedram’s upcoming tactical guide diving deeper into these concepts.

Watch the full talk at and RSVP for the next!

Mistake #1: Not Prioritizing Your Hires

The first mistake managers encounter in the hiring process is not prioritizing hires. Often, when faced with building a company’s first team, managers tend to hire for generalists. While this is a fine principle, managers must still identify what the most critical thing to be built first is.

“The biggest challenge that I see a lot of teams make is they don’t prioritize their hires, which means they’re not thinking about: what do they need to build? What is the most critical thing that they need to build?”

Mistake #2: Ignoring Hustle, Energy, and Optimism

People naturally prefer pedigreed engineers — engineers that have worked at a FAANG company, for example, or engineers that have built and shipped significant products. But for young companies that might not have established a reputation yet, they’re more likely to attract new college grads.

“They’re not going to know how to do some of the things that an engineer who’s been in the industry for a while will do, but oftentimes what they have is something that gets beaten out of people. They have this energy, they have this optimism. If you get a staff engineer that’s spent their entire career at—name-your-company—they know how to do things a particular way. And they’re more inclined to saying no to any new idea than they are to saying yes.”

So don’t worry too much about getting that senior staff engineer from Google. Often, bright-eyed, optimistic young engineers just out of school work well too. 

Mistake #3: Not Understanding Your Hiring Funnel

Managers must be aware of how their hiring funnels are laid out. No matter what size of company or what role, a hiring manager must treat recruiting like their job and be a willing partner to their recruiters.

Get involved as early as sourcing. 

“If they’re having a hard time, for example, getting people to respond back to their LinkedIn or their emails, help put in a teaser like, ‘Our director or VP of this would love to talk to you.’ If that person has some name recognition, you’re much more likely to get an initial response back. That can really fundamentally change the outcomes that you get.”

Mistake #4: Not Planning Interviews

Once a candidate gets past the resume screen to interviews, that process should be properly planned. Interviewing is both a time commitment from the candidate and from the company’s engineering team. Each part of the process must be intentional. 

For phone screens, a frequent mistake is having inexperienced engineers conduct them. 

“You want the people who are doing the phone screens to really be experienced and have good kinds of instincts around what makes a good engineer.”

For interviews, Pedram suggests teams have at least two different sessions on coding and at least one more session on culture. 

To train interviewers, a company can either have new interviewers shadow experienced interviewers or experienced interviewers reverse shadow new interviewers to make sure they’re asking the right questions and getting the right answers down.

Mistake #5: Lowering Your Standards

Early companies can encounter hiring crunches. At this time, hiring managers might decide to lower their standards in order to increase headcounts. However, this can be extremely dangerous. 

“You make this trade off, when you hire a B-level person for your company—that person forever is the highest bar that you’re going to be able to achieve at scale for hiring because B people know other B people and C people.”

What about the trade-off between shipping a product and hiring a less qualified teammate? Just kill the idea. 

“At the end of the day, these are people you’re going to be working with every day.”

Mistake #6: Ignoring Your Instincts

Failure #5 ties into Failure #6: Ignoring your instincts. If there’s a gut feeling that your candidate won’t be a good fit, you should trust it. 

“The worst thing you can do is fire someone early on because your team is going to be suffering from it. They’re going to have questions. They’re going to think, ‘Oh, are we doing layoffs? Am I going to be the next person?’” 

Mistake #7: Hiring Brilliant Jerks

During the hiring process, managers may also encounter “Brilliant Jerks.” These are the candidates that seem genius, but may be arrogant. They might not listen, they might become defensive when criticized, or they might be overbearing. 

The danger of hiring brilliant jerks is that they’ll often shut down others’ ideas, can become huge HR liabilities, and won’t be able to collaborate well within a team environment at all. 

So when hiring, one of the most important qualities to look out for is a sense that “this is someone that I could give feedback to, or I have a sense that I could give feedback to you.”

Mistake #8: Giving Titles Too Early

Startups tend to give titles early on. A startup might make their first engineering hire and call them CTO, but there are a lot of pitfalls that come with this.

“Make sure that you’re thoughtful about what your company is going to look like maybe a year or two year, five years from now. If you’re successful, your five person thing is going to be a 500,000 person company.” 

Can your CTO, who has managed a five person team effectively, now manage a 500,000 person team?  

Instead of crazy titles, provide paths to advancement instead. 

“Give people roles that let them stretch themselves, that let them exert responsibility and take on responsibility and let them earn those crazy titles over time.”

Mistake #9: Overselling The Good Stuff 

When a team’s already locked in their final candidates, young companies might be incentivized to oversell themselves to candidates—after all, it’s hard to compete against offers from FAANG these days. But transparency is always the best way to go. 

“You need to tell a realistic story about what your company is about. What are the challenges you’re facing? What are the good things? What are the bad things? Don’t catfish candidates. You may be the most compelling sales person in the world, and you can get them to sign your offer and join you, but if you’re completely off base about what the work environment is like a weekend, a month, and six months in, at some point, they’ll realize that you are completely bullshitting them.”

As Director of Engineering at Facebook, Pedram made sure to put this into practice. After mentioning the positives and perks of the job, he would follow up with “By the way, it’s very likely that on a Friday night at 9:00 PM, we’re going to have a crazy spam attack. We’re going to have some kind of a vulnerability come up. My team, we work harder than a lot of other teams. We work crazy hours. We work on the weekends, we work during holidays because that’s when shit hits the fan for us. I wouldn’t have it any other way, but it’s hard. So if you’re looking for a regular nine to five thing, this is not your team.” 

Make sure to set expectations for the candidate before they commit. 

Mistake #10: Focusing on the Financial Upside

Don’t sell a candidate on money as their primary motivation during this process. 

“If the key selling point you have to your potential candidate is that you’re going to make them a millionaire you’ve already lost.”

Instead, develop an environment and culture about a mission. Highlight that “if we create value for the world, we’ll get some of that back.”

Mistake #11: Getting Your Ratios Wrong

Companies want to make sure that they have the right ratio of engineering managers to engineers. Each company might define their ratios differently, but it’s important to always keep a ratio in mind and keep teams flexible.

Mistake #12: Not Worrying About Onboarding

Once a candidate signs on, the onboarding process must be smooth and well-planned. Every six months, Pedram would go through his company’s current onboarding process himself, pretending to be a new hire. This allowed him to iterate and make sure onboarding was always up to date. 

“It’s also a great opportunity for you to make sure that all of your documentation for getting engineers up to speed is living documentation as well.”

Mistake #13: Not Focusing on Culture

Culture should underscore every part of the hiring process. It can be hard to define, but here are some questions to start: 

  • How does your team work? 
  • How does your team solve problems? 
  • How does your team deal with ambiguity? 
  • How does your team resolve conflicts? 
  • How does your team think about transparency and openness? 

“Culture is something that everyone likes to talk about, but it really just boils down to those hard moments.”

Mistake #14: Never Reorganizing

Failure #14 and #15 really go hand in hand. As many companies grow, they may forget to reorganize. 

“You need to shuffle people around. Make sure you have the right blend of people on a particular team. You have the right experiences on a team.” 

Again, keep your ratios in mind.  

Mistake #15: Never Firing Anyone

Lastly, and possibly the hardest part of hiring, companies need to learn to let people go. 

“People have their sweet spot. Some people just don’t scale beyond a 20 person company. And, you know, keeping them around is not fair to them and not fair to your company.”