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Let us design a stock option strategy from scratch for a hypothetical education startup.

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They are just getting started and plan to develop high-quality digital education content

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for schools.

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They have two co-founders, Margal and Catherine.

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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.

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They incorporate a company with 10,000 equity shares to begin with.

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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.

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A few months down the line, with the product built to a reasonable extent, they feel they

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need to hire a couple of junior engineers to help them speed up the development, and

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very importantly, also someone for sales and marketing.

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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.

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They know the digital education domain is quite crowded, but they wish to build a product

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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.

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After a lot of deliberation, they agree that the vision of empowering teachers resonates

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very strongly with them.

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This is their non-financial vision that energizes them to come to work every morning, and they

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would like to have such people on the team who are also energized by such a vision.

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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.

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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.

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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.

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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.

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Once they find the right people who are inspired by their values, vision and culture, they

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would also need to incentivize them financially using stock options.

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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

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projections to determine how much profit one equity share would provide in four years.

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Let us do that next.