WEBVTT 00:00.000 --> 00:07.000 The Atomic 60 stock options framework works along 6 dimensions. 00:07.000 --> 00:12.000 When you start to design a stock options strategy as a founder, 00:12.000 --> 00:17.000 you should consider the following 6 dimensions of your stock options policy. 00:17.000 --> 00:20.000 1. Why? 00:20.000 --> 00:23.000 2. Who? 00:23.000 --> 00:26.000 3. How many? 00:26.000 --> 00:29.000 4. What price? 00:29.000 --> 00:33.000 5. What conditions? 00:33.000 --> 00:37.000 6. How often? 00:37.000 --> 00:43.000 Sometimes a few of these dimensions can act like forces that run in opposite directions. 00:43.000 --> 00:50.000 As a founder, you need to find the right balance of these dimensions for your startup. 00:50.000 --> 00:56.000 The balance that you find need not be the same as a very good friend startup that operates next door, 00:56.000 --> 01:00.000 or another startup that was recently successful. 01:00.000 --> 01:02.000 Don't imitate others. 01:02.000 --> 01:07.000 Your own stock options design will flow from your values and vision. 01:07.000 --> 01:10.000 That is what gives it authenticity. 01:10.000 --> 01:14.000 That is what makes it your stock options strategy. 01:14.000 --> 01:17.000 Let us look at each of the 6 dimensions in detail. 01:17.000 --> 01:23.000 And as we do that, please make a lot of notes and take time out to think about them. 01:24.000 --> 01:27.000 1. Why? 01:27.000 --> 01:33.000 The why dimension expects a few to define the objectives of your stock options strategy. 01:33.000 --> 01:36.000 You can consider two objectives. 01:36.000 --> 01:40.000 Would you like to reward your team for their past efforts? 01:40.000 --> 01:43.000 Or would you like to reward them for their future contribution? 01:43.000 --> 01:48.000 Depending upon your objective, the design of your scheme would be different. 01:49.000 --> 01:53.000 While in most cases you look ahead and create a scheme for the future, 01:53.000 --> 01:58.000 in some cases however you might have to consider the past. 01:58.000 --> 02:02.000 If you are a startup that has been in existence for some time now, 02:02.000 --> 02:08.000 and you believe that the team has already created value for which they have not been rewarded appropriately, 02:08.000 --> 02:13.000 you could have past reward as an objective as well. 02:13.000 --> 02:18.000 You could have also verbally promised them stock options when they joined, 02:18.000 --> 02:22.000 but you all were just too busy working so it did not happen then. 02:22.000 --> 02:25.000 You might want to make up for the lost time. 02:25.000 --> 02:28.000 Another reason for considering the past. 02:28.000 --> 02:32.000 Or you may not have promised anything in the past, 02:32.000 --> 02:35.000 but you feel that they stuck with you through trying times 02:35.000 --> 02:40.000 and a past reward feels like the right thing to do. 02:40.000 --> 02:42.000 Do not ignore that feeling. 02:42.000 --> 02:44.000 Honor it. 02:44.000 --> 02:48.000 You should now already see why your scheme might have a different flavor 02:48.000 --> 02:51.000 compared to your friend's stock options scheme. 02:51.000 --> 02:53.000 It must. 02:53.000 --> 02:59.000 If however you are a fairly new setup or you believe that they have been compensated adequately in the past, 02:59.000 --> 03:03.000 you need not consider any past reward in the form of stock options. 03:03.000 --> 03:06.000 That is perfectly fine too. 03:06.000 --> 03:12.000 For convenience, we have created a separate category of stock options for past reward. 03:12.000 --> 03:15.000 These are called grassiest options. 03:15.000 --> 03:20.000 They usually are more favorable in their grand price or resting terms. 03:20.000 --> 03:23.000 Next under why. 03:23.000 --> 03:26.000 Whether you feel the need to reward them for the past or not, 03:26.000 --> 03:32.000 you would most likely want to reward them for their future contribution with the company. 03:32.000 --> 03:36.000 Most stock options schemes are designed for this purpose. 03:36.000 --> 03:41.000 We have created a category called growth options for this purpose. 03:41.000 --> 03:44.000 This way you can easily distinguish between the two objectives 03:44.000 --> 03:48.000 and target the options accordingly. 03:48.000 --> 03:52.000 Why have we created two separate categories? 03:52.000 --> 03:55.000 Why not just bunch them up together? 03:55.000 --> 04:01.000 Why not just add a few more options to the growth category and be done with it? 04:01.000 --> 04:04.000 There are two key reasons to do so. 04:04.000 --> 04:10.000 One, setting clear expectations is very important in such relationships. 04:10.000 --> 04:15.000 Doing the right thing to clear your conscience is sometimes not enough. 04:15.000 --> 04:18.000 You also need to communicate it clearly. 04:18.000 --> 04:23.000 By demarcating grassiest and growth options separately and by giving them out, 04:23.000 --> 04:28.000 using two distinct sets of letters and other documentation, 04:28.000 --> 04:34.000 you clearly set the grassiest objectives as a one-time reward for the past. 04:34.000 --> 04:40.000 It is sometimes important to make it clear that this is one-time only 04:40.000 --> 04:46.000 so that the older team members do not continue to expect extra reward in the future. 04:46.000 --> 04:51.000 You might be at the cusp of growth where new people are about to join 04:51.000 --> 04:54.000 and your challenges now might be different. 04:54.000 --> 04:59.000 You can use a one-time grassiest grant to clearly say to the early joinees, 04:59.000 --> 05:03.000 we are so grateful to you for being with us. 05:03.000 --> 05:07.000 Here are grassiest options for your past contribution. 05:07.000 --> 05:12.000 Now on, you can consider yourself to be on par with the ones who will join us in the future. 05:12.000 --> 05:18.000 Many of you and the ones who join in the future will be eligible to get growth options 05:18.000 --> 05:20.000 for future contribution. 05:20.000 --> 05:25.000 But the ones who join after today will not receive any grassiest options. 05:25.000 --> 05:27.000 Those were only for you. 05:27.000 --> 05:33.000 So clear messaging and setting expectations clearly in their mind is very important. 05:33.000 --> 05:38.000 Bunching up the grant into a single grant does not do that very effectively. 05:38.000 --> 05:41.000 2. 05:41.000 --> 05:45.000 You might want to grant the grassiest options at more favorable terms, 05:45.000 --> 05:49.000 for instance a lower price or with a shorter vesting period. 05:49.000 --> 05:52.000 This could be because it is the right thing to do. 05:52.000 --> 05:57.000 Perhaps you promised them these options three years ago but were too busy to grant them. 05:57.000 --> 06:02.000 It might be unfair to grant these options to them now at the current valuation. 06:02.000 --> 06:09.000 Similarly, it might seem unfair to ask them to wait for another few years for grassiest options to vest. 06:09.000 --> 06:11.000 You might want to vest them earlier. 06:11.000 --> 06:17.000 Since you might believe they have in a way already served this so-called vesting period 06:17.000 --> 06:20.000 by being with the company for the past few years. 06:20.000 --> 06:27.000 Different terms means you would also need to create a separate grassiest scheme. 06:27.000 --> 06:31.000 So two things under the wide image. 06:31.000 --> 06:38.000 Do you wish to reward them for the past or for the future or both? 06:38.000 --> 06:43.000 Gracious options or growth options or both?