[xtracto]

Back when i was testing so setup a startup I proposed a crazy idea to my cofounder: Let's setup an equity programme where every time a new person is hired, a chunk of equity would be taken directly from the existing employees(including founders!!), and would go to the new hire.

So that 2 founders would start with say 80% of the company (20% was for VCs) , and after hiring the first hire, he will get 20%, and founders will be left with 60%. After the 2nd hire 1st hire would give up 5%, and founders 10% to get 15% ...

My idea was that this would disincentivise hiring new people, so that new people would be hired only when absolutely necessary .

I'm still planning on experimenting with this at some point in my life.

[yardie]

Doesn’t this already happen at most startups. Each round dilutes the founders share and dilutes the shares of existing employees. The VC might have targets like, acquire 10m users or generate $40m in revenue, and that might not be possible with a team of 5.

[lbriner]

That's only if you raise another round and don't have enough equity for the founders to just gives some of theirs. OP is talking about something more automatic for every new hire.

[DavidPeiffer]

I could see that working while hiring is exclusively by the founders, but what would be the plan after there are departments with mostly autonomous hiring functions? Would the allocation continue to come from all employees, the manager of that department, or everyone upstream?

It's an interesting concept, but it feels like there would be significant pitfalls any way I think if it.

[xtracto]

Not only that... there's the issue with stock options already bought: once the employee bought the stock then it wouldnt be possible to take them from her. And when do you "freeze" the stock amount of an employee? When they leave?

There are lots of details that I thought about, and surely many others I didn't. That's why I'm still ruminating the idea in my head, until I feel it is complete enough to apply it.

[peyton]

What you’re describing is already standard practice. You have to shuffle option pools as you hire more people and raise more money.

[xtracto]

No, when I was hired as a 1st engineer at a startup, I was given 2.5% of the shares.

When we hired the next 10 people, the value/% of my shares did not get affected. So, I in a way I, as an IC with 2.5% of shares could push to hire more people to do more of the work I did without any negative direct impact to me (I know the impact comes as the company spends more money, has to raise more and then dilute the value of the stocks in theory, but that's something employees rarely see).

What I want is being able to sit down with say, the team of 10 people in the startup and ask them: Hey, do we REALLY need to hire this 11th person? we all are going to have to give X% of our share of the pie to him. And particularly, when starting the project, the first 5 or 6 should have a sizeable chunk of the pie, and not 2.5% ... ideally, a 1st employee would get to 2.5% once there are about a 100 people in the company (i.e. after hiring the other 97 people)

[dlubarov]

> When we hired the next 10 people, the value/% of my shares did not get affected.

Where did the new hires' shares come from, if not dilution?

They might have come from an option pool, but that just adds a layer of indirection. When the option pool runs low, typically it is replenished with new shares, diluting existing ones.

So I think the dynamic you're describing already exists in most startups.

[peyton]

> Hey, do we REALLY need to hire this 11th person?

This conversation happens when fundraising. Usually the lead wants to see the option pool replenished at the same time.

[lbriner]

As others have said, there are some gotchas with the idea but you could probably do something similar that doesn't involve stock like with a profit-sharing fund or a fixed amount to spend on your socials or something!