Rethinking Start-Up Equity: The Dynamic Stock Plan

Serial entrepreneur and friend of Founders Workbench, Jay Adelson, thinks current methods for distributing startup equity are outdated. The traditional stock option, which allows employees to purchase 25 percent of their equity with no further commitment to the company after one year, is increasingly resulting in one-year terms that end on the vesting cliff date, an outcome that is costly and damaging to employee morale.

After working with Goodwin Procter attorneys to develop a different type of equity incentive plan, Adelson is testing a new approach at his latest venture, Opsmatic. The new method, dubbed the Dynamic Stock Plan, is designed to work alongside traditional stock options and vesting, and allows up to the first 15 employees (based upon the number of employees who remain through the first major financing) to share in 15 percent of the company, provided that each employee stays through a liquidity event, such as an IPO or an acquisition. This egalitarian strategy is designed to be a long-term incentive that encourages loyalty to the company and team.

Read more about how Adelson’s Dynamic Stock Plan in this Gigaom article.

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