How many employee options are granted in startups?
When joining a startup company, the package of options an employee gets can undeniably improve his financial future. One of the disadvantages throughout the negotiation is a lack of objective, reliable data.
An interesting occurrence which repeats itself is a psychological effect: employees would rather take the largest amount of options offered without taking the option worth into consideration. For example: an offer of 5,000 options from company A vs. 50,000 options from company B.
Since there is a lack of data in addition to ongoing requests, S-Cube has conducted the only research in Israel which is based on actual data of over 400 Israeli startup companies, presenting the amount of options granted based on the roles, financial round and field of activity.
Before we present our data, we will first define what an option is. An employee option is the right to purchase shares of the company under certain conditions which are previously set in the employees’ contract. The option of purchasing is usually under a clause of a specific time. Employee options are common in the high-tech field, since these options are translated quite often into tangible money when a company has an ‘exit’ or goes public. The options inspire employees to optimize their performance and given in addition to their salary in order to encourage a sense of commitment. Options are usually dependent on a specific time restriction (vesting) that is usually between 3-4 years long.
The option percentage given per employee in round B companies according to their position:
Our survey has confirmed that the higher the position in the company, the more options granted. A senior manager would get 0.78% of the options granted as opposed to a junior employee who is granted only 0.17%. In addition, it has been shown that the percentage of the total options granted in companies that are in round B is on average 7.08%.
The complete survey will be presented at our upcoming events, hope to see you there with us!
S-Cube