One area of interest to investors and entrepreneurs alike is the size of the employee stock option pool post financing and the "typical" grant sizes for key employees.
As a rule of thumb, one should assume that a post A Round company will need to support a CEO, three VP's and 5 to 7 directors with incentive stock options from the stock option pool. And while circumstances vary widely to affect the proper amount of options to a position, the general consenus is the following for various positions:
CEO - Option Grant of 4 to 8%
VP's - Options of 2 to 3%
CFO - Options of 1to 3%
Directors - Options of 1/2% or less
All of which dictates a need for an option pool amount around 20% of the post A round share amount. Founder CEO's with shares or other particular facts may influence this and all generalizations are dangerous.
The right amount for any situation is and should be the focus of a fair amount of discussion.
It is tough to find the right people at the right time. Especially when you're offering a job in a start up which may span two, three or four traditional job descriptions, i.e. the position is the marketing department -- including responsibilities for marketing communications, product management, public and investor relations, and brand marketing, or the position is sales engineer and technical support and product developer.
And while it is clear that you need flexible, multi-faceted people in these situations, it isn't as obvious that there is one critical personality trait for employee success in the start up environment.
That critical trait is good judgment. In my experience, people with bad judgment are able to arrive at the wrong conclusion 100% of the time. It is their gift. They can take any number of varying inputs and apply bad judgment to arrive at the wrong answer. In a start up where new situations, dilemmas and challenges arise daily -- many of which have no precedent since everything that is going on is new to everybody, the application of good judgment may be the only reasonable shot at success.
People with good judgment aren't correct, on the hand, a 100% of the time. But perfection isn't the point. The point is that the start up CEO will face a lot of uncharted territory in growing an enterprise and the presence of good judgment in the assembled team is a priceless asset.
I would choose an Art History major with superior judgment over a Business Management major without any day. And I have done so.
How do you assess judgment? I ask questions in the interview process where we relive various scenarios from the prospective employee's previous situations. Why did you choose the college you did? What do you think could have been done better by the last management team you worked with? How do you decide between two seemingly indistinguishable choices? Questions about the judgments formed and made by the candidate in previous situations can deliver reliable insights into how they assess facts and people.
Hire people from their resumes, former positions or education and you'll get a group that is likely more qualified to do a good job than capable of doing a good job.
