Why Give Stock Options to Employees

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Startups give stock options to employees as part of their compensation package.

Most startups create an options pool at the Series A fundraise.

A founder-friendly term sheet will have both the investors and the founders pay for the options pool.

In an investor-friendly term sheet, the founders will pay for the options out of their equity.

It's important to create an options pool as it provides incentive to the employees.

It allows the founders to provide another means of compensation.

Without it, the founders will need to compensate employees out of cash.

In a startup, cash is precious and should be conserved.

The options pool takes pressure off the cash reserves.

Options should be vested over a four-year timeframe.

This ensures the employees stay with the company long enough to earn the shares.

Consider creating a stock options pool for employees in your company.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let's go startup something today.

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