| 1 | |
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| Let us design a stock option strategy from scratch for a hypothetical education startup. | |
| 2 | |
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| They are just getting started and plan to develop high-quality digital education content | |
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| for schools. | |
| 4 | |
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| They have two co-founders, Margal and Catherine. | |
| 5 | |
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| Both of them have been passionate about education for a very long time and wish to contribute | |
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| to the education conversation worldwide. | |
| 7 | |
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| They incorporate a company with 10,000 equity shares to begin with. | |
| 8 | |
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| Since they both are software engineers, they start to build their education application | |
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| together without hiring anyone else just yet. | |
| 10 | |
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| A few months down the line, with the product built to a reasonable extent, they feel they | |
| 11 | |
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| need to hire a couple of junior engineers to help them speed up the development, and | |
| 12 | |
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| very importantly, also someone for sales and marketing. | |
| 13 | |
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| They plan to sell their product to educational institutions so they need someone experienced | |
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| in B2B sales. | |
| 15 | |
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| They know the digital education domain is quite crowded, but they wish to build a product | |
| 16 | |
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| that though digital has a unique manner in which the content is delivered. | |
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| They also have a separate section for teachers to help them upskill so they can use the content | |
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| effectively. | |
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| They are not trying to replace the teachers but to train and empower them. | |
| 20 | |
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| After a lot of deliberation, they agree that the vision of empowering teachers resonates | |
| 21 | |
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| very strongly with them. | |
| 22 | |
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| This is their non-financial vision that energizes them to come to work every morning, and they | |
| 23 | |
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| would like to have such people on the team who are also energized by such a vision. | |
| 24 | |
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| They also agree that apart from integrity and professionalism, a core value they would | |
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| want to have in their team members is warmth and compassion. | |
| 26 | |
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| The definition of their values and a non-financial vision provides them with clarity in terms | |
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| of the kind of people they would like to have on the team. | |
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| For instance, they are now clear that someone who is very well connected in the education | |
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| ecosystem is experienced in B2B sales, but bears a loud and a slightly domineering attitude | |
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| may not be the right fit for the culture they would like to create. | |
| 31 | |
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| Now they are also not looking for people who merely have their relevant experience or are | |
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| passionate about education in general, but those who would be excited about empowering | |
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| teachers in particular. | |
| 34 | |
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| As they begin their search, they are also aware that they cannot afford to pay market | |
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| salaries. | |
| 36 | |
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| Once they find the right people who are inspired by their values, vision and culture, they | |
| 37 | |
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| would also need to incentivize them financially using stock options. | |
| 38 | |
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| So they need to note two things. | |
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| One, they intended benefit for each such role over four years, and two, their financial | |
| 40 | |
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| projections to determine how much profit one equity share would provide in four years. | |
| 41 | |
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| Let us do that next. | |