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How many stock options should executives at a startup company be granted? November 28, 2010

Posted by HubTechInsider in Acquisitions, Boston Executive Moves, Investing, IPOs, Staffing & Recruiting, Startups, Venture Capital.
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How many stock options should executives at a startup company be granted?

The Going Rates for Senior Executives’ Stock Options in the Boston area, 2011:

A President or CEO of a startup may typically receive anywhere from 6% to 10% of the company’s stock. The actual percentage of stock granted to the CEO will depend upon such factors as the company’s life stage and financial stability and revenue outlook when the new CEO signs on for employment. The earlier in the company’s formationary period the new CEO signs on, the higher the percentage of stock granted to him may be.

A Senior Vice President of a startup may typically receive anywhere from 1% to 3% of the startup’s stock. In general, and this is across many industries that startups participate in in the Boston area, those with a marketing and sales pedigree are rewarded toward the higher range and those with a financial orientation toward the lower range. This is often due to the fact that very top-notch marketing and sales executives are sinmply harder to find because of intense competition in the Boston area, and when they succeed, they add signigficantly to the bottom line of a startup company’s revenue outlook. In contrast, consider that senior Financial executives are essential to reassure skitish venture, angel and other early stage startup capital funding institutional and individual investors, but they can’t usually stake a claim to having increased sales.

A Vice President or a Key Manager of a startup company in the Boston area may expect to receive (or in the Boston area, may expect to have had to have negociated strongly for) .5% to 2% of a startup company’s stock. A Vice President of sales or a manager of technolgy would be liklier to command toward the higher end of this range of stock percentages, while a Vice President of finance or manufacturing would probably be at the lower end. As I outlined above with Senior Vice Presidents, those with marketing and sales expertise have the greatest amount of leverage. Executives and managers below these senior levels usually receive something less than .5% of the startup’s stock in the Boston area.

I should point out with some stridency that the above stock percentages that I have outlined can be misleading, and I advise starup senior management teams, hr directors, boards of directors, investors, and job seekers to take the above guidelines with care. In the Boston area, a great deal of savvy negociations by knowledgable parties, all armed with a great deal of stock option terminology and business experience, would have to be conducted to arrive at stock option structures like the ones above.

The actual percentage of a startup company that an employee receives in options is much less important than its potential value. Having 10% of a company that’s unlikely to exceed $1 million in value is much less desirable than having 1% of a company that has a good chance of being worth $100 million.

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I’m Paul Seibert, Editor of Boston’s Hub Tech Insider, a Boston focused technology blog. I have been working in the software engineering and ecommerce industries for over fifteen years. My interests include electronics, robotics and programmable microcontrollers, and I am an avid outdoorsman and guitar player. You can connect with me on LinkedIn, follow me on Twitter, even friend me on Facebook if you’re cool.

I own and am trying to sell a dual-zoned, residential & commercial Office Building in Natick, MA. I have a background in entrepreneurship, ecommerce, telecommunications and software development, I’m the Director, Technical Projects at eSpendWise, I’m a serial entrepreneur and the co-founder of Tshirtnow.net.

The Decline of Boston’s Investment Firms February 7, 2010

Posted by HubTechInsider in Investing.
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Boston is known as the home to a host of mutual fund firms, and Peter Lynch, of Fidelity Magellan fame, used to brag that he could do better at picking stocks than his peers based in New York. In 1989, Lynch wrote a bestselling (and a book I highly recommend) book, One Up on Wall Street. During Lynch’s tenure, from 1977 to 1990, Magellan gained 29% a year, compared with the 15% return on the S&P 500. Yet a February 2nd Bloomberg news report shows that mutual fund stalwarts such as Fidelity Investments, Putnam Investments, and MFS Investment Management have seen their overall share shrink over the past decade as traditional stockpicking has lost favor among retail investors and returns trailed some rivals. The three held 12% of the $6.9 trillion in equity and bond funds in December, down from 21% a decade earlier. Many in the industry are of the belief that the stockpickers didn’t do a very good job of sidestepping the two recent stock market bubbles.

Investors pulled $37 billion from actively managed stock funds last year, according to Morningstar. Much of that money found its way into bonds, index-tracking funds, or exchange-traded funds – categories where Boston’s big firms have never been strong. The damage has been more than reputational, with the city’s fund companies cutting employment and moving jobs out of state to lower costs.

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