I also found that it is important to provide a copy of recent salary/option survey to the board as a comparison. I have frequently used Venture One surveys in the past. Some VC firms have their own surveys, but most don’t. So a comparative data makes it easier for the board to approve employee options.

I also found that it is important to provide a copy of recent salary/option survey to the board as a comparison. I have frequently used Venture One surveys in the past. Some VC firms have their own surveys, but most don’t. So a comparative data makes it easier for the board to approve employee options.

Both great points. On the former, I used to do this all the time, but, as with salaries, I’ve found that annual planning of option grants has gotten far more difficult than it used to be. With dynamic hiring needs and rapidly changing markets, the competition for great hires has gotten absurd for many companies. This means that small companies that are only hiring a few people can have a 100% swing or more in options required to hire the right people.

Of course, you still need to make a cut at budgeting, but the board needs to recognize that the budget may be no more than an initial guideline.

You’re right on on the option reconciliation. i actually like to see this as part of the cap table.

Both great points. On the former, I used to do this all the time, but, as with salaries, I’ve found that annual planning of option grants has gotten far more difficult than it used to be. With dynamic hiring needs and rapidly changing markets, the competition for great hires has gotten absurd for many companies. This means that small companies that are only hiring a few people can have a 100% swing or more in options required to hire the right people.

Of course, you still need to make a cut at budgeting, but the board needs to recognize that the budget may be no more than an initial guideline.

You’re right on on the option reconciliation. i actually like to see this as part of the cap table.

- As part of any company’s budgeting/planning process, it should have a standard range of salary and option grants for various levels of positions, and this should be annually approved by the board. This range should be shown in a column in the table shown above. That way, when you present the equity grants for approval, they can immediately see that the grant is in the range (this is true for both new employees and promotions). No one need waste time on these. Anything OUTSIDE the range is automatically deserving of explanation.

- I have found that board members frequently want to know how much stock is left in the option pool(s), so the package should actually have a complete reconciliation of the option pool (in summary form) so they can see the total pool size, total granted, total exercised, and remaining to be granted. I also find it useful to include all BUDGETED positions on this reconciliation so the board can see how the current grants fit into the grand scheme of things.

If you’re not already tracking all this information, you are not running a tight ship.

- As part of any company’s budgeting/planning process, it should have a standard range of salary and option grants for various levels of positions, and this should be annually approved by the board. This range should be shown in a column in the table shown above. That way, when you present the equity grants for approval, they can immediately see that the grant is in the range (this is true for both new employees and promotions). No one need waste time on these. Anything OUTSIDE the range is automatically deserving of explanation.

- I have found that board members frequently want to know how much stock is left in the option pool(s), so the package should actually have a complete reconciliation of the option pool (in summary form) so they can see the total pool size, total granted, total exercised, and remaining to be granted. I also find it useful to include all BUDGETED positions on this reconciliation so the board can see how the current grants fit into the grand scheme of things.

If you’re not already tracking all this information, you are not running a tight ship.