A tactical module for founders who want to understand dilution modeling, cap table structure, stock vs options, vesting cliffs, and repurchase rights. Helps you retain control and build a fair equity strategy as you grow and raise more capital.
Equity Compensation 101 — Stock vs Options
Startups often compensate early team members with equity, using either stock or stock options. Understanding the differences—including tax treatment and timing—is critical to designing fair and motivating compensation.
Vesting ensures team members earn their equity over time, and cliffs protect startups from over-distributing ownership early. It’s a key tool to safeguard long-term alignment and cap table hygiene.
Dilution reduces ownership percentages as new shares are issued. Founders must understand how dilution works, how to model it, and how it affects both control and upside.
An option pool sets aside equity for future hires. The size and timing of the pool—especially in fundraising negotiations—affect founder ownership and investor stakes.
A 409A valuation sets the fair market value of your stock for option grants. It’s a legal requirement that also impacts taxes, compensation strategy, and fundraising.
Repurchase Rights & Departing Employees — Keeping Your Cap Table Clean
Repurchase rights allow the company to reclaim unvested or recently vested shares from team members who leave. This keeps the cap table clean and aligned with active contributors.