Early employees should receive more equity than those who join later because they take on greater risks and work harder in a chaotic startup environment.

Startups typically allocate between 10% and 20% of their equity for employee incentives, and venture capitalists often require this equity pool to be established before investing.

If you hire an outside CEO, they usually receive around 5% equity, while an outside CTO or COO typically gets about 3%.

Before distributing equity, consider how many people you need to hire and how much equity you plan to allocate for their compensation. The first employee at a traditional Silicon Valley startup typically receives between one and two percent equity.

When determining equity distribution, consider how much cash you have on hand, as cash is often scarce when starting a startup.

It's sometimes beneficial to offer a lower salary in exchange for a higher equity stake, but not all employees may be open to this arrangement.

Different employees value equity differently; some prefer the certainty of a salary over the uncertainty of equity, so tailor your compensation strategy accordingly.

Most startups fail, and only a small percentage achieve significant financial success, so view equity as a tool to enhance your chances of success rather than a fixed resource to be divided.

It's crucial to ensure that early employees feel a strong sense of ownership in the company, as they will play a significant role in its success.

In my 30 years in Silicon Valley, I've never met a successful entrepreneur who felt they were too generous with their early employees.