Employee ownership has always been at the core of the Silicon Valley ethos. From the earliest days of the Valley, startup founders understood that employees who benefit from their company’s success will work harder, stay longer, and perform better than those who don’t have a meaningful stake.
It’s no secret that a thoughtful compensation plan can be a powerful tool for recruiting and retention, particularly in highly competitive markets, but the best way to structure these plans remains controversial. I’ve been on a bunch of boards where views diverged wildly about refresh grants and I’ve seen the debate get quite heated.
My goal here is to lay out what I believe to be the best practices with respect to option grants. I’d also like to call out some high-quality articles from the past on this topic including this one by Andy Rachleff and this post by Fred Wilson.