Skip to content
Ventures Edge
All articles
Markets & Strategy1 min read

Cracking the Code: Median ESOP Allocations and What They Mean for Your Startup

Mikey & Colin

Co-Founders

Cracking the Code: Median ESOP Allocations and What They Mean for Your Startup

Fueling startups begins with the right incentives.

The ESOP (Employee stock option pool) is essential to structure your option pool to balance the dilution effects on previous founders with your potential hiring plan. Every company's cap table is unique, and while dilution and hiring plans are highly specific, benchmarking current market ESOP allocations can provide valuable insights. Check out Peter Walker’s post on LinkedIn (Carta) - here - for the current median ESOP percentages based on company valuation.

As a rule of thumb, as the company grows, so does your option pool. This is because for a startup, the option pool acts as a dual incentive for contributors: ownership and alignment with the company's success. Naturally, this sense of ownership motivates employees to contribute more effectively toward the company’s growth and objectives. Additionally, a growing option pool allows the company to attract and retain top talent by offering competitive equity-based compensation packages, which are especially valuable in high-growth startups where cash flow may be limited but the potential upside is significant.

For founders: Balancing ESOP size is a critical part of attracting and retaining top talent while managing dilution for investors. It's a signal of your commitment to creating value for the team and rewarding long-term contributors. Remember, a well-structured ESOP ensures alignment between employees and the company’s success. 

How are you thinking about structuring your ESOP? Reach out!

info@venturesedge.ai

Mentioned in this piece

Related articles

  • Markets & Strategy5 min read

    Oura’s IPO and the Business of Wearables

    Oura’s S-1 makes a strong case that wearables are becoming much more than hardware businesses. The ring gets customers in the door, but the value is really in subscriptions, years of health data, and the software that turns that data into something useful. Four months after our Fitbit piece, Oura looks like a much stronger counterexample to the idea that standalone wearable companies cannot compete with Apple and Google.

  • Markets & Strategy6 min read

    Airtable Didn't Fail

    Airtable’s acquisition by Bending Spoons looks like a major step down from its 2021 valuation, but that misses much of the story. The company still built a product used by hundreds of thousands of organizations, reached nearly half a billion dollars in recurring revenue and generated exceptional returns for early investors. The bigger lesson is what happens when a great company is priced as if it needs to become a generational one.

  • The Next Billion AI Users
    Markets & Strategy3 min read

    The Next Billion AI Users

    Spend enough time in tech and it's easy to believe everyone is using AI. The reality is more nuanced. While some industries have embraced it as a daily necessity, many others are only just beginning their journey.

VE Weekly

The week in tech, AI and early-stage capital.

One send a week. Whole pieces, not a digest of links out.

One email a week. Unsubscribe in one click. Your address is never shared.