Team
How Much Do You Pay Early Employees — and How Much Equity?
Based on Jason Calacanis's startup checklist. Equity benchmarks sourced from TechCrunch and Carta.
Compensation: don't make it a conversation
Have a plan before anyone asks. Knowing your numbers ahead of time removes negotiation from the equation and signals that you've thought this through. Work out:
- What each key role is worth at current market rates
- At what revenue milestone you can justify each senior hire — e.g. VP of Sales when you hit $X ARR, VP of Marketing at $Y, Head of PR at $Z
- What your startup needs to hit financially to be able to afford top talent at all
Getting creative with compensation
You probably can't compete with established companies on salary alone. The levers available to you:
- Equity — you can often attract exceptional people who believe in the mission if the upside is real
- Remote-first hiring — casting a wider geographic net often means finding more qualified candidates at a lower cost basis than a local-only search would
- Potential over pedigree — mid- and junior-level developers with high upside can be hired affordably and grown. A common pattern: one senior engineer who raises the bar and upskills the rest of the team
The balance is real: experience plus high compensation versus affordable plus high potential. Most early-stage startups can't have both. Be clear-eyed about which trade-off you're making.
Equity benchmarks for early hires
These are rough reference points, not rules. They vary by stage, traction, and how early the hire joins.
| Role | Approximate equity |
|---|---|
| Third co-founder | ~10% |
| VP of Sales or Marketing | ~1–2% |
| Senior engineer | ~0.7–1% |
| Mid-level engineer | ~0.45% |
| Junior engineer | ~0.15% |
| Junior business hire | ~0.05% |
| Advisor | 0.1–0.3% |
Equity is limited — protect it
One of the most common early mistakes is giving away too much equity before you understand what it costs. A messy cap table makes future fundraising harder and can put investors off entirely.
Set up an ESOP early. An employee stock option plan creates a structured pool you can draw from. Establish it and communicate it clearly to your team.
The 83(b) election is critical. If you go deep into stock options and liquidation preferences, the single most important thing to understand is the 83(b) provision. It lets you pay taxes on the fair market value of your stock options at the time of granting — before the company is worth more. Without it, you'll owe taxes after every new funding round as your options increase in value. Jason Calacanis recommends the stock options episode with Wilson Sonsini's Becki DeGraw at thisweekinstartups.com/basics as the definitive resource.
Vesting schedules
The standard structure:
- 4-year vesting with a 1-year cliff
- The cliff means no equity vests until the employee has been at the company for one full year
- At year one, 25% vests all at once
- After that, 1/48th of the total vests each month for the remaining three years
This protects both sides. It makes you more willing to be generous with equity upfront, because you have a structured mechanism for handling early departures. See also the Finding a Co-founder page for how the same logic applies to the founding team.
Build an org chart early
Know the shape of the team you're building toward. Having a board of advisors — people who've built companies before — is one of the most valuable resources for figuring out what that org chart should look like at each stage.