A start-up employee (or perhaps an entrepreneur) asks this question:
How often do employees of VC-backed startups get stock options?
In India, this varies a fair bit. My usual suggestion to entrepreneurs I have worked with is to give options to all employees but I recognize that this may not always be feasible or even desirable. A few things to note about Indian startups:
- Indian startups tend to have a lot of employees. I have invested in companies based in India, Singapore, the US and Australia. For a given stage of development, Indian startups have much larger teams than companies in most other countries. So the likelihood that a given employee, especially a junior one, will receive a good-sized option grant is quite low.
- Even in companies where options are awarded to many or all employees, they are not always valued by staff, and often not even understood properly. I’ve been on the board of a company where employees complained that they “received only 10,000 options” whereas their friend in company XYZ received 10 times as many options, not realizing that this isn’t an apples-to-apples comparison. I have sometimes taken the effort to explain what stock options are and how they work, but it clearly remains a poorly understood topic.
- Some founders can be very frugal with dilution. “I’m paying them a salary so what more do they want?” is a common attitude and I often wouldn’t even consider it an unreasonable view. I have heard good arguments in favor of giving options only to senior staff.
If you’re an employee of a VC-backed startup and you do want stock options as part of your package, good for you. I would recommend you bring this up with your startup’s founders. A long-term-oriented founder should find your attitude refreshing and positive.
From my latest column at Yourstory.