How to Manage Equity When Hiring Your First 10 Employees

Your first 10 hires are the most important and the most expensive in equity terms. Give away too much and you will have nothing left for Series A investors or later employees. Give away too little and you will lose candidates to competitors who offer real upside. This guide provides specific, stage-appropriate ranges for equity grants, explains how to structure vesting, and shows you how to manage your cap table as your team grows.

Start with the option pool

Before you can grant equity to anyone, you need an option pool. If you have already raised funding, your investors likely required one as part of the deal (see our guide on stock option pools). If you are bootstrapped, you still need to formally create a pool by passing a board resolution.

Typical seed-stage option pool sizes range from 10–20% of the company's fully diluted capitalization. For your first 10 hires, plan to allocate roughly 50–70% of the pool, reserving the rest for future employees and refresher grants.

Equity ranges by role and stage

These ranges assume a seed-stage startup with 1-2 founders and an option pool of 10–15%:

Structuring vesting for employees

Standard vesting for employee option grants:

• 4-year vesting, 1-year cliff: the industry standard. No shares vest for the first 12 months. If the employee leaves before the cliff, they get nothing. After the cliff, 25% vests immediately, and the rest vests monthly (or quarterly) over the remaining 3 years.
• Good/bad leaver provisions: especially important in the UK. Define what happens to vested and unvested options when an employee leaves. Good leavers keep vested options; bad leavers (dismissed for cause) typically lose everything.
• Acceleration on change of control: consider single-trigger (all options vest on acquisition) or double-trigger (options vest only if the employee is terminated after acquisition). Double-trigger is more common and investor-friendly.

The offer conversation: how to present equity

Most candidates do not understand startup equity. Here is how to present it clearly:

• State the grant as a percentage: "0.5% of the company on a fully diluted basis." Always specify fully diluted to avoid confusion.
• Explain the vesting schedule: "Over 4 years with a 1-year cliff, meaning after 12 months you will have vested 25% of your options."
• Provide the current valuation context: "Our last round valued the company at $5M. Your 0.5% is equivalent to $25,000 at today's valuation." Be careful not to promise future value.
• Explain the exercise price: "Your exercise price is $X per share, set by our 409A valuation. You only profit if the company's value exceeds this price."
• Clarify tax implications: point them to resources about ISOs vs NSOs (US) or EMI vs unapproved options (UK). Suggest they consult a tax advisor.

Cap table management as you grow

With each new hire, your cap table becomes more complex. Here is what to track for each option grant:

• Grant date and board resolution reference
• Number of options and percentage of fully diluted cap
• Exercise price
• Vesting start date, cliff date, and full vesting date
• Vesting status (how many have vested, how many remain)
• Option type (ISO/NSO in US, EMI/unapproved in UK)
• Employee status (active, terminated, exercised)

If you are tracking this in a spreadsheet, you will make mistakes. One wrong formula, one missed update on a departure, and your cap table is wrong. This matters when you raise your next round — investors will check, and discrepancies create delays and kill trust.

Common mistakes when granting early equity

• No vesting on co-founder shares: if a co-founder leaves after 6 months and keeps 50% of the company, the remaining founders and investors suffer. Always vest founders.
• Verbal equity promises: "We'll figure out equity later" creates legal risk and bad feelings. Formalize every grant with a written agreement.
• Not budgeting the pool: granting equity without tracking how much pool you have left. You do not want to discover that you need to expand the pool (diluting everyone) to honor a promise.
• Treating all roles equally: a CTO and a marketing coordinator should not receive the same equity. Differentiate based on seniority, impact, and risk.
• Forgetting about tax: for UK companies, failing to set up EMI properly means employees pay income tax and NI on exercise instead of tax-advantaged CGT. For US companies, failing to do a 409A means employees face additional penalties.
• Ignoring departures: when an employee leaves, their unvested options return to the pool. Update the cap table immediately.

eSignHub: equity and hiring in one place

eSignHub makes it easy to manage the equity lifecycle for early hires. Create option agreements from templates, send them for e-signature alongside offer letters, track vesting automatically on your cap table, and handle leaver events cleanly. No more toggling between a spreadsheet, a document editor, and an e-signature tool.