Navigating equity agreements for new startups
Ease your candidates’ concerns by offering them a piece of the company pie
Equity agreements are common incentives used to attract top talent to startup companies that can’t always afford top salaries or promise job security. Before presenting these contracts, however, it is important for business owners to create clear documentation that explains how new employees will be impacted personally, professionally, and financially when they enter the high-risk startup business environment.
Jose Laurel, the Recruitment Process Outsourcing (RPO) Director at G&A Partners, recently spoke with HerMoney on this topic, discussing popular questions among startup candidates like: “Why are you offering me equity instead of cash?”
Startup owners should begin by reassuring their candidates that it's possible to minimize the potential financial hit through programs to help employees recoup lost front-end income. Knowing that your business has thought to mitigate that risk by creating equity programs can make a candidate's decision to join your team easier.
You should also be prepared to answer these two follow up financial questions. Laurel says: "What is the firm's current valuation?" and "How many shares are outstanding?"
The dialogue around these questions should be straightforward. Interviewees will respect clarity in this area as they make decisions about employment opportunities at startup companies.