Research about Founder Equity

Knowledge Sharing:
1.  Early-stage companies should generally allocate at least 15 percent of their available shares for future key hires.
2.  A member of your senior leadership team, up to and including the COO, may get anywhere from 1 percent to 3 percent.  The exact amount depends on how much salary you can offer (more salary equals less equity, and vice versa) and the significance of the person’s role in the organization. Very early engineering or sales team members often receive anywhere from 0.15 percent to 1 percent equity.
3.  CEOs are in their own league. If you’re bringing on a CEO to run a venture-backed company, you can expect to give him or her 5 percent to 8 percent of your company’s equity, and maybe even 10 percent. In all cases, we’re talking about common stock. Signing bonuses are rare, but substantial performance-driven bonuses are not.
4.  Of course, there’s no guarantee that even the most promising hire will work out. So you want to protect yourself in case, against all odds, you’ve hired a dud. It’s typical to require a four-year vesting period, but often, no stock vests until the first anniversary of the executive’s hire -- the so-called one-year cliff. That helps make sure the employee really is a good fit before he or she starts getting shares in your company. In very rare cases, a company will even require employees to sell their stock if they leave the  company, minimizing the number of shares owned by nonemployees.
5.  The amount and terms of equity become irrelevant, however, if you are unable to convince the executive you are recruiting of your vision and potential. That’s what sets the successful founders apart from the rest, and in the end, that -- and a lot of hard work -- is what’s going to bring value to any shares.
6.  First, a caveat. For your first key hires, three, five, maybe as much as ten, you will probably not be able to use any kind of formula. Getting someone to join your dream before it is much of anything is an art not a science. And the amount of equity you need to grant to accomplish these hires is also an art and most certainly not a science.
7.  Hiring cofounder is different from hiring early employees.
8.  Once you have assembled a core team that is operating the business, you need to move from art to science in terms of granting employee equity. And most importantly you need to move away from points of equity to the dollar value of equity. Giving out equity in terms of points is very expensive and you need to move away from it as soon as it is reasonable to do so.
9.  The first thing you do is you figure out how valuable your company is (we call this "best value").
10.  The first thing you do is you figure out how valuable your company is (we call this "best value"). This is NOT your 409a valuation (we call that "fair value"). This "best value" can be the valuation on the last round of financing. Or it can be a recent offer to buy your company that you turned down. Or it can be the discounted value of future cash flows. Or it can be a public market comp analysis. Whatever approach you use, it should be the value of your company that you would sell or finance your business at right now. Let's say the number is $25mm. This is an important data point for this effort. The other important data point is the number of fully diluted shares. Let's say that is 10mm shares outstanding.
11.  The second thing you do is break up your org chart into brackets. There is no bracket  for the CEO and COO. Grants for CEOs and COOs should and will be made by the Board.
12.  The key thing is to communicate the equity grant in dollar values, not in percentage of the company. Startups should be able to dramatically increase the value of their equity over the four years a stock grant vests. We expect our companies to be able to increase in value three to five times over a four year period
14.

Categories:
1.  Cofounders, hired by Founders
2.  CEO, COO, hired by board
3.  First Brackets: CFO, VP Sales, CMO, CPO, CTO, VP Eng, VP HR.
4.  2nd Brackets: Director level manager, key people(engineering, design superstar)
5.  3rd Brackets: Key functions in engineering, product, marketing, etc.
6.  4th Brackets: employees are not in key functions, including receptions, clerical employees

Senior Team: 0.5x
Director Level: 0.25x
Key Functions: 0.1x
All Others: 0.05x

Two Types:
1.  Stock Option
2.  Common Stocks

Learnts about Stock Option:
1.  Stock option will shrink as the company issues more shares to investors or other new employees.
2.

http://www.slideshare.net/edkuiters/how-to-dividethepiepublic
How to divide equity ?
1.  Time : Negotiated Base Salary - Cash Compensation * 2 / 2000
2.  Unpaid Commission: *2
3.  Small Money: *4
4.  Investment
5.  Cost
6.  Building
7.  Unreimbursed Expense

Founder uses Time and Cost
Employees use Time
Investor use Money, Unpaid Commission and Credibility

References:
7 Common Questions About Startup Employee Stock Options
The Perils of Accepting Stock Compensation in a Startup Company
Founder's Pie
http://capgenius.com/2011/03/06/splitting-pie/
https://docs.google.com/spreadsheet/ccc?key=0AmhoYEAndoegcDMxRUtNVURRRkVZMzk5dkZyNlFRYWc&pli=1#gid=0
https://www.udemy.com/founders-pie-calculator/
http://www.slideshare.net/msuster/final-startup-grind?ref=http://www.bothsidesofthetable.com/2013/02/06/how-to-configure-your-startup-team/

Preferred Stocks vs Common Stocks:
1.  As assets are liquidated, payments go first to creditors and bondholders; then preferred stockholders are paid and, last of all, common stockholders.
2. Preferred stocks can get dividents regularly, but common stocks won't.
3. Holding shares of common stock gives you the opportunity to vote in the election of the board of directors
4. This is usually equivalent to one vote per share that you own. Owning preferred stock usually guarantees the payment of dividends but does not come with voting rights.
5.  Ownership in either type of stock entitles you to a piece of the company's profit. One way profit is distributed to the shareholders is through dividends, which are often paid in cash from the company's earnings. Dividends are usually paid on a quarterly basis.
6. Common stockholders never know the value of their dividends in advance, while preferred stockholders receive dividends at a fixed rate. While the dividends on preferred stocks tend to be higher than those on common stock, they will not appreciate with company growth
7.  Investors can think of preferred [stocks] as somewhere between a stock and a corporate bond, as they trade on an exchange the way stocks do, but the dividends are generally quite high, like those from long-maturity bonds,
8.  holding periods, common stocks have historically offered higher returns than preferred stocks or bonds,
9.  The bottom line is that common shareholders rarely get anything in bankruptcy cases, while preferred stockholders have a better chance of getting at least some money back.
10. Like common stock, preferred stock is sold by companies and is then traded among investors on the secondary market. Preferred stock is less risky than common stock, therefore investors can expect less reward.
11.  The bottom line is that preferred stock is less risky than common stock. It's designed to provide an income generating opportunity for investors while raising capital for the underlying company. As Buck investors, we probably shouldn't be thinking about preferred stock until we approach retirement in 30 years, but it's good to know the difference. 
12.  The vast majority of technology startups are capitalized in the same manner: common stock to the founders, common stock reserved in an option pool for employees and consultants, and preferred stock (Series A, Series B, etc.) sold to investors
14.   As successful entrepreneur Ryan Himmel has pointed out, equity splits should reward a combination of the highest-valued contribution and the largest undertaking of risk.
15.  In the end, splitting equity may be the toughest thing you have to do as a member of a founding team. You’re going to hurt feelings, make difficult decisions and live with the consequences.
16.  Conventional wisdom says that you gain far more in working as a team than you lose by diluting by half before you start.
17.  In this case, I would take your total ownership and divide it up by employee tiers. Maybe something like 10 percent each for five C-level executives; 2.5 percent each for 10 VP level executives and 1 percent each for 25 director/manager level staff (adding up to a total of 100 percent, with all other things being equal).
18.  One of the first tough decisions facing startup founders is how to allocate equity among the founders, investors, directors, advisors, and employees.
19.  Founders can contribute in many ways - some bring patents or insights from years of research, some bring technical abilities and business experience, and some bring network connections.
20.  Let’s assume that your company reserves 55% of the equity for founders, 30% for investors, and 15% for the option pool 
21.  

吕不韦

References:
http://www.foxbusiness.com/investing/2012/05/01/whats-difference-between-preferred-and-common-stock/
https://open.buffer.com/buffer-open-equity-formula/
https://www.quora.com/How-should-equity-be-split-between-founders-early-employees-consultants-and-investors-when-the-company-is-bootstrapped
http://fundersandfounders.com/how-to-make-money-the-startup-way/ https://www.legal.io/guide/555be3a277777738de6f0000/Don-t-be-Pied-Piper-1-How-to-Divide-Equity-Among-Startup-Founders