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Sam Altman, the CEO of OpenAI, has some invaluable advice for startup founders: make sure your early employees get a fair share of the company's equity. This might sound simple, but it's a game-changer.
Photo: AP
Share the Wealth with Early Employees
Altman suggests that the first 10 employees should collectively own about 10% of the company. These employees earn their shares over four years, so they need to stick around and contribute to the company's success. If they do, they'll increase the company's value far beyond that 10%.
Why Generosity Matters
Founders often make the mistake of being stingy with employee equity while being overly generous with investors. Altman thinks this is completely backward. The early employees are the ones who work hard day in and day out, helping to build the company from the ground up. They are the backbone of the startup and are crucial for its long-term success.
The Reality of Investors
While investors play an important role, their contribution is often limited to writing a check. Despite big promises, they usually don’t have as much of an ongoing impact as employees do. Therefore, it makes more sense to negotiate with investors for a smaller share of equity and allocate more to the people who are building the company every day.
Long-Term Value
Employees add value over time. Their dedication, hard work, and innovation are what drive the company forward. They should be rewarded for their contributions with a significant stake in the company's success. This not only motivates them but also aligns their interests with the long-term goals of the startup.
The Right Approach
Altman believes in fighting for your employees' equity. Make sure they feel valued and invested in the company's future. This approach not only helps in retaining top talent but also ensures that everyone is working towards a common goal.
Conclusion
Sam Altman's advice is clear: Be generous with your employees and fair with your investors. This mindset can make a huge difference in the success of a startup. Remember, the employees are the ones who will help you build your dream into reality. Reward them accordingly, and you'll create a motivated, loyal, and highly productive team that drives your company to greater heights.
Listen to Sam Altman:
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