How much equity should we give to our new CMO/CFO/etc.?
This is a tricky question that comes up often with early-stage founders as the company grows and retaining top talent becomes a top priority. In this short episode of Sidekick, David explores a structured approach to determining equity grants using the base salary multiplier method.
Listen on
TIMESTAMPS:
(0:00) Intro
(0:59) Overview of the equity simulator
(1:38) Running an example – Setting up the grant
(2:08) Understanding the results
(2:23) How to communicate equity in Dollar/Euro terms
(3:38) Recap & Final thoughts
(4:06) Outro
Access our simulator (A 7-step methodology)
Key takeaways:
1) The Challenge of Equity Allocation
The question of how much equity to grant to employees, especially executives, depends on balancing retention incentives and future equity needs. Offer too little, and you risk losing key talent. Offer too much, and you might create an unbalanced cap table that could hurt future growth.
2) The Base Salary Multiplier (BSM) approach
There are several methodologies but we find this one straightforward.
The BSM uses four key inputs:
Post-money valuation (e.g. £10M after a seed round)
Cap table structure (number of shares, option pool size)
Market salary benchmark for the role (not the current employee’s salary)
Salary multiple based on seniority (e.g., 0.7x–2x for a VP-level hire)
By inputting these values into our simulator, you can calculate the optimal number of shares to grant.
3) Communicating Equity to Employees
Instead of focusing on percentages, framing equity grants in monetary terms makes them more tangible.
For instance, rather than saying, "We’re giving you 1% equity," it’s more effective to say, "We’re granting you £100K worth of shares, which could grow 3–5x in the next few years if we hit our milestones."
4) Planning for Growth and Future Hires
A structured approach not only helps with individual grants but also ensures a consistent approach as your company scales.
It prevents over-allocation of shares, ensuring enough equity remains for future hires.
It makes negotiations easier and more transparent, reducing friction in the hiring process.
Conclusion
Equity is a powerful tool, but only when used strategically. By adopting a structured, data-driven approach, startups can offer fair and competitive grants while maintaining a healthy cap table.
For a deeper dive and feel free to access to our equity simulator.
Stay tuned for more insights in upcoming episodes of the Sidekick podcast!
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