| WEBVTT | |
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| The Atomic 60 stock options framework works along 6 dimensions. | |
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| When you start to design a stock options strategy as a founder, | |
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| you should consider the following 6 dimensions of your stock options policy. | |
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| 1. Why? | |
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| 2. Who? | |
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| 3. How many? | |
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| 4. What price? | |
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| 5. What conditions? | |
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| 6. How often? | |
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| Sometimes a few of these dimensions can act like forces that run in opposite directions. | |
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| As a founder, you need to find the right balance of these dimensions for your startup. | |
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| The balance that you find need not be the same as a very good friend startup that operates next door, | |
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| or another startup that was recently successful. | |
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| Don't imitate others. | |
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| Your own stock options design will flow from your values and vision. | |
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| That is what gives it authenticity. | |
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| That is what makes it your stock options strategy. | |
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| Let us look at each of the 6 dimensions in detail. | |
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| And as we do that, please make a lot of notes and take time out to think about them. | |
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| 1. Why? | |
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| The why dimension expects a few to define the objectives of your stock options strategy. | |
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| You can consider two objectives. | |
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| Would you like to reward your team for their past efforts? | |
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| Or would you like to reward them for their future contribution? | |
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| Depending upon your objective, the design of your scheme would be different. | |
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| While in most cases you look ahead and create a scheme for the future, | |
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| in some cases however you might have to consider the past. | |
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| If you are a startup that has been in existence for some time now, | |
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| and you believe that the team has already created value for which they have not been rewarded appropriately, | |
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| you could have past reward as an objective as well. | |
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| You could have also verbally promised them stock options when they joined, | |
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| but you all were just too busy working so it did not happen then. | |
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| You might want to make up for the lost time. | |
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| Another reason for considering the past. | |
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| Or you may not have promised anything in the past, | |
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| but you feel that they stuck with you through trying times | |
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| and a past reward feels like the right thing to do. | |
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| Do not ignore that feeling. | |
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| Honor it. | |
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| You should now already see why your scheme might have a different flavor | |
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| compared to your friend's stock options scheme. | |
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| It must. | |
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| If however you are a fairly new setup or you believe that they have been compensated adequately in the past, | |
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| you need not consider any past reward in the form of stock options. | |
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| That is perfectly fine too. | |
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| For convenience, we have created a separate category of stock options for past reward. | |
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| These are called grassiest options. | |
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| They usually are more favorable in their grand price or resting terms. | |
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| Next under why. | |
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| Whether you feel the need to reward them for the past or not, | |
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| you would most likely want to reward them for their future contribution with the company. | |
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| Most stock options schemes are designed for this purpose. | |
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| We have created a category called growth options for this purpose. | |
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| This way you can easily distinguish between the two objectives | |
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| and target the options accordingly. | |
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| Why have we created two separate categories? | |
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| Why not just bunch them up together? | |
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| Why not just add a few more options to the growth category and be done with it? | |
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| There are two key reasons to do so. | |
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| One, setting clear expectations is very important in such relationships. | |
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| Doing the right thing to clear your conscience is sometimes not enough. | |
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| You also need to communicate it clearly. | |
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| By demarcating grassiest and growth options separately and by giving them out, | |
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| using two distinct sets of letters and other documentation, | |
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| you clearly set the grassiest objectives as a one-time reward for the past. | |
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| It is sometimes important to make it clear that this is one-time only | |
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| so that the older team members do not continue to expect extra reward in the future. | |
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| You might be at the cusp of growth where new people are about to join | |
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| and your challenges now might be different. | |
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| You can use a one-time grassiest grant to clearly say to the early joinees, | |
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| we are so grateful to you for being with us. | |
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| Here are grassiest options for your past contribution. | |
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| Now on, you can consider yourself to be on par with the ones who will join us in the future. | |
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| Many of you and the ones who join in the future will be eligible to get growth options | |
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| for future contribution. | |
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| But the ones who join after today will not receive any grassiest options. | |
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| Those were only for you. | |
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| So clear messaging and setting expectations clearly in their mind is very important. | |
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| Bunching up the grant into a single grant does not do that very effectively. | |
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| 2. | |
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| You might want to grant the grassiest options at more favorable terms, | |
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| for instance a lower price or with a shorter vesting period. | |
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| This could be because it is the right thing to do. | |
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| Perhaps you promised them these options three years ago but were too busy to grant them. | |
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| It might be unfair to grant these options to them now at the current valuation. | |
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| Similarly, it might seem unfair to ask them to wait for another few years for grassiest options to vest. | |
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| You might want to vest them earlier. | |
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| Since you might believe they have in a way already served this so-called vesting period | |
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| by being with the company for the past few years. | |
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| Different terms means you would also need to create a separate grassiest scheme. | |
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| So two things under the wide image. | |
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| Do you wish to reward them for the past or for the future or both? | |
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| Gracious options or growth options or both? | |