Principles
Equity represents an ownership stake in Tremendous.
- All employees get equity. This aligns the team with our goal to make the company successful.
- Equity is a form of compensation. We factor equity into total comp.
- Equity should be employee-friendly. Equity suffers from an information asymmetry, where founders and VCs are sophisticated about it, but employees typically are not. We want to be transparent and design our equity plan with integrity.
Equity structure
Vesting and cliff
In line with industry standards, our initial grants have a 4 year vest, and a 1 year cliff. You have to stay for 1 year to get your first 1/4th of the grant, and from thereon forward, you vest 1/48th of the grant every month.
Stock options
Your grant gives you stock options. These give you the option to purchase stock for a specific price (the “strike price”). You “exercise” your options by paying that price, and the options turn into stock.
It’s common to grant options instead of stock at startups. Stock grants are a taxable income event, while options grants are not. Granting options keeps employees from having to pay taxes on stock that they can’t yet sell.
Our options grants are Non-qualified Stock Options, commonly abbreviated to “NSOs”.
Early exercise
We allow you to exercise your options before they vest. This is called “early exercise”. This has the advantage of locking in favorable tax treatment (if the share price later appreciates), but comes with an up-front cost of the exercise price.
10 years to exercise
You have 10 years to decide whether or not to exercise your options, even if you leave Tremendous.
The default practice in the startup world is that, if an employee leaves, they have 90 days to exercise their options. Employees must decide between paying exercise costs plus a tax bill (if options have appreciated), or to forfeit their options entirely. We’ve designed our equity plan to be more flexible and employee friendly.
Equity grants
There are 3 types of equity grants at Tremendous. Here’s what they are, and when we grant them. The main thing to note is that Tenure Grants have a different structure.
| Type | Goal | Timing | Sizing | Structure |
|---|---|---|---|---|
New hire grant | Make new hires owners | On start date | Role benchmarks | 4 year vest, 1 year cliff. |
Performance and promotion grants | Reward outstanding performance | During comp review | Role benchmarks | 4 year vest, 1 year cliff. |
Tenure grants | Keep employees earning equity after their initial grant expires. | After 2 years at the company, on an annual basis. | 1/4 of the size grant we’d give if we hired the employee today. |