Equity for Your First 10 Hires: Compensation Bands and Vesting

Why Equity Decisions Compound

The equity grants you give your first 10 hires shape your cap table for the life of the company. A 1% over-grant to the wrong hire isn't a 1% mistake — it's the difference between owning 22% and 21% at a Series C exit, multiplied by the team-level signaling effect when employees discover the inconsistency.

Equity decisions also signal what you value. Pay your second engineer 0.3% while paying your first salesperson 1.5%, and you've told the engineering team how you prioritize them. Most early-stage equity disasters come from inconsistency rather than from absolute generosity or stinginess.

This guide gives you the benchmark ranges, the vesting standards, and the negotiation framework. It pairs with our hiring culture-fit vs culture-add framework for the broader hiring discipline.

Equity Grant Benchmarks by Role and Stage

Role	Pre-Seed	Seed	Series A	Series B
Head of Engineering / CTO #2	2.0–5.0%	1.0–3.0%	0.5–1.5%	0.25–0.75%
Senior Engineer	0.5–1.5%	0.3–1.0%	0.15–0.5%	0.08–0.25%
Engineer (mid-level)	0.25–0.75%	0.15–0.5%	0.08–0.25%	0.04–0.15%
Junior Engineer	0.10–0.30%	0.05–0.20%	0.03–0.10%	0.02–0.06%
Head of Sales (first hire)	1.5–4.0%	1.0–2.5%	0.5–1.5%	0.25–0.75%
Sales rep (AE)	0.25–0.75%	0.15–0.5%	0.08–0.25%	0.04–0.15%
Head of Marketing (first)	1.0–3.0%	0.5–1.5%	0.3–1.0%	0.15–0.5%
Marketing manager	0.20–0.60%	0.15–0.40%	0.08–0.25%	0.04–0.12%
Head of Product	1.5–3.5%	0.75–2.0%	0.4–1.2%	0.2–0.6%
Designer (first)	0.5–1.5%	0.3–1.0%	0.15–0.5%	0.08–0.25%
Customer Success Lead	0.5–1.5%	0.3–1.0%	0.15–0.5%	0.08–0.25%
Operations / Finance Lead	0.5–1.5%	0.3–1.0%	0.15–0.5%	0.08–0.25%

These ranges come from a synthesis of First Round Capital, Pave, Carta, and Index Ventures data. Use the high end of each range for top-quartile candidates, established players in their function, or candidates leaving high-status roles. Use the low end for candidates earlier in career, transitioning between functions, or where you're paying close to market salary.

How Vesting Works

The default everyone should use: 4-year vesting with a 1-year cliff.

Vesting period (4 years): total grant is earned over 4 years
Cliff (1 year): no shares vest until the employee has been at the company 12 months. At month 12, 25% of the grant vests in a single moment. Monthly vesting thereafter.
Monthly vesting after cliff: months 13–48, 1/48 of the total grant vests each month

The cliff protects against early bad hires — if someone leaves in the first year, they leave with zero shares. The 4-year schedule rewards committed employees and gives the company tools for retention and re-grants.

Variations You'll See

Schedule	When It's Used	Risk
4 years, 1-year cliff (standard)	Default for nearly all early-stage hires	None — this is normal
4 years, 6-month cliff	Sometimes used for trusted second-time founders or known hires	Slightly less protection for company
4 years, no cliff	Very rare; usually a sign of weak negotiation	Company loses cliff protection
3 years, 1-year cliff	Sometimes used for very senior late hires	Compresses vesting; can create faster departures
5 years, 1-year cliff	Very rare; usually for executive hires post-IPO	Difficult to retain talent over the extra year

Deviations from the standard need explicit reasoning. "Because we wanted to be generous" isn't enough — it changes the retention math for every subsequent hire.

How to Talk About Equity in Offers

Most candidates don't understand equity. They underestimate value when grants are presented poorly and overestimate when grants are presented carelessly. The pattern that wins offers:

Show Three Numbers

Percentage ownership (e.g., 0.5%)
Number of shares (e.g., 25,000 of 5,000,000 total)
Estimated value at target exit (e.g., "$200K if we exit at $1B in 5 years; $0 if we don't")

The third number is what most companies skip and what most candidates need. Honest exit math signals both confidence and transparency.

Be Honest About Probability

A grant valued at $200K at exit is only worth that if the company exits successfully. Most startups don't. Frame it: "We're betting on a Series B or above outcome; if we're successful, this equity is worth materially more than market salary differences. If we're not, the equity is worth zero. Your salary is the safe portion."

Candidates who go in with that framing become aligned co-bettors. Candidates who go in expecting guaranteed equity wealth become bitter when reality intervenes.

Provide the 409A Valuation

Your most recent 409A valuation gives candidates the formal current value of their shares. It's not the speculative exit value, but it's the legally defensible "today" number. Share it with offer letters.

Use Resources Like Carta or Pulley Equity Tools

If you're on Carta or Pulley, both platforms have employee-facing tools that model equity outcomes across exit scenarios. Send candidates the link as part of the offer process. The math becomes their math, not your sales pitch.

When and How to Refresh Equity Grants

Initial grants vest over 4 years. Without refresh grants, employees who are still at the company at year 3 are looking at minimal future equity accumulation — which is a retention problem at exactly the moment institutional knowledge is most valuable.

Three refresh patterns:

Pattern 1: Promotion Refresh

When an employee is promoted, grant additional equity equal to roughly 50% of what you'd give an external hire at that new level. This rewards growth and acknowledges expanded responsibility.

Pattern 2: Mid-Vesting Refresh (Year 2.5)

At month 30, employees typically still have 18+ months of vesting remaining but they've vested 62.5% of their original grant. A "mid-vesting refresh" at year 2.5 adds another 4-year vesting grant, extending their effective vesting tail and aligning them through what's typically the highest-impact period of their tenure.

This is one of the most effective retention levers in early-stage companies. Companies that refresh at 2.5 years retain top performers through Series B at materially higher rates than companies that don't.

Pattern 3: Performance / Milestone Refresh

After major milestones (Series A close, $1M ARR, key product launch), grant additional equity to the team members most responsible for the milestone. This is less mechanical than the first two but signals recognition.

Common Equity Mistakes

Inconsistent Grants Across Similar Hires

The most common mistake. Two engineers hired in the same month with similar seniority get 0.5% and 0.3% because one negotiated harder. When they discover the discrepancy (and they will — employees discuss equity), the inequity destroys trust.

The fix: publish internal compensation bands and stick to them. Use Pave, Option Impact, or your own benchmarking. When a candidate negotiates outside the band, decline. The short-term cost of losing one candidate is smaller than the long-term cost of inconsistency.

Granting Too Much Too Early

Pre-seed founders sometimes give their first hire 5% to "lock them in" without modeling what that means at Series B. By the time the company has raised three rounds, the 5% grant has cost the founder more in cap table erosion than the hire could justify. Use the benchmarks; don't improvise.

Failing to Refresh

Employees at 2.5+ years tenure are your most valuable institutional assets. If they're not getting refresh grants, they're looking at a vesting cliff coming up — and they're a prime target for external recruiting. Build a refresh schedule into your operating cadence.

Confusing Stock Options With Restricted Stock

In US C-corps, early employees typically get stock options (ISOs), not stock. Options have an exercise price and exercise tax implications. Founders should understand the difference and explain it to candidates. For very early grants (pre-funding), some founders use restricted stock with an 83(b) election — different tax treatment, different mechanics.

Not Documenting the Equity Plan

A 30-page board-approved equity incentive plan governs how grants work. Most early-stage founders haven't read theirs and can't answer basic questions ("What happens to my equity if I'm terminated?"). Read it. Be able to explain it. Update it when needed.

The Conversation About Equity at Termination

This is the conversation every founder dreads. When an employee leaves, the equity conversation follows specific rules — most of which are in your equity plan, even if you don't remember them.

Departure Type	Vested Treatment	Unvested Treatment
Voluntary resignation	Keep vested; typically 90-day window to exercise options	Forfeit unvested
Involuntary termination (no cause)	Keep vested; some plans accelerate per agreement	Forfeit unvested
Termination for cause	May lose vested in some plans; usually keeps vested	Forfeit unvested
Disability / death	Keep vested; extended exercise window; sometimes acceleration	Per plan terms
Acquisition / change of control	Depends on plan and acquisition terms; may accelerate	Often accelerates per plan

The 90-day post-termination exercise window for ISOs is the standard. It's also the rule that has hurt the most early employees historically — they leave a company, get a 90-day window to come up with potentially tens of thousands of dollars to exercise, and forfeit because they can't.

Many forward-thinking companies extend the post-termination exercise window to 7–10 years (the "Pinterest plan"). This is a substantial gift to employees and a strong recruiting signal. Worth considering if your plan allows.

When Not to Give Equity (Not For You)

Skip or minimize equity grants for:

Contractors and freelancers. Use cash, not equity. Equity creates ongoing relationship complexity that contractors don't justify.
Sales reps in commission-heavy roles. Heavy variable cash compensation often substitutes for equity. Use both sparingly if you do.
Advisors with no real involvement. Standard advisor grants are 0.10%–0.25% with 2-year vesting and monthly vesting from day one. Don't grant advisor equity to people who won't actively help.
Anyone you can't articulate a 12-month impact for. If you can't say "this hire will deliver X by Y date," you're not ready to commit equity to the role.

Conclusion

Equity decisions for your first 10 hires are some of the highest-leverage decisions you'll make. The grants set precedent. The vesting protects the company. The refresh grants retain key contributors. The honest conversations build trust.

Use the benchmark ranges. Standardize on 4-year vesting with 1-year cliff. Refresh at 2.5 years and at promotions. Talk about equity honestly — percentage, share count, and exit-modeled dollar value. Pair equity discipline with consistent hiring criteria, structured one-on-ones, and a clean founder agreement at the top — and you've built the people foundation that scales.

Frequently Asked Questions

How much equity should I give my first engineering hire?

For a seed-stage company, 0.3%–1.0% is typical for a senior engineer, 0.5%–1.5% for a tech lead, and 1.0%–3.0% for a Head of Engineering / CTO #2 role. Pre-seed grants run roughly 50% higher; Series A grants run roughly 50% lower. Use the benchmark tables and adjust based on seniority and your stage.

What is standard equity vesting?

Four-year vesting with a one-year cliff. The first 25% vests in a lump at month 12 (the cliff); the remaining 75% vests monthly across months 13–48. This protects the company from early-departure risk while rewarding committed employees. Deviations from this standard (no cliff, 3-year vesting) need explicit reasoning.

Should early employees get refresh grants?

Yes. The most effective retention pattern is a mid-vesting refresh at year 2.5 (granting another 4-year package) plus promotion-based refreshes. Employees at year 3+ without a refresh are facing a vesting cliff and become prime targets for external recruiters. Building refresh grants into your operating cadence is one of the highest-ROI retention investments available.

How do I explain equity value to candidates?

Show three numbers: percentage ownership, share count, and modeled dollar value at a target exit (e.g., 'Worth $200K if we exit at $1B in 5 years; worth $0 if we don't exit'). Use Carta or Pulley's employee-facing tools if available. Be honest about probability — most startups don't exit. Candidates who go in with realistic expectations become aligned long-term.

What happens to employee equity if they leave?

Vested shares are typically kept; unvested shares are forfeited. The post-termination exercise window for options is typically 90 days — meaning the departing employee must come up with cash to exercise vested options within 90 days or forfeit them. Some companies extend this to 7–10 years (the Pinterest plan) as an employee benefit. Acquisition or change-of-control may accelerate vesting per your plan.

Should I give advisors equity?

Standard advisor grants are 0.10%–0.25% with 2-year vesting and monthly vesting from day one (no cliff). Use them only for advisors who actively help — taking calls, making introductions, providing strategic input. Don't grant advisor equity to people who'll be inactive; you're giving away ownership for no return.

What's the difference between stock options and restricted stock?

Stock options give the employee the right to buy shares at a fixed exercise price within a defined window. Restricted stock is actual ownership of shares, subject to vesting (typically with an 83(b) election to fix tax treatment). Most US C-corp employees get options (ISOs). Very early founders and pre-funding hires sometimes get restricted stock instead. The tax treatment differs substantially — consult counsel before deciding which to use.