Is a RSU award/ CEO award of 3% common for an IPO of a company?
No, but the bottom line is, Founder CEOs often get additional grants over time.
Venture-backed start-ups suffer dilution, often times, dramatic dilution (Snap didn’t, but most venture-backed start-ups do). VC firms almost always make up at least a small portion of this dilution over time — usually at later stages — to the founder-CEO only — if she’s still with the company as the years go one.
No one wants a CEO demotivated, and no one wants a founder CEO to go IPO with an abnormally low amount of equity.
So the SNAP 3% itself was unusual. But there was a reason here, even if it wasn’t 100% explicitly stated. One way or another, the grant was to incent / align interests with the founder CEO. This 3% only went to Snap’s CEO, not his co-founder Bobby Murphy, who otherwise previously were split 50/50 in equity.
I used to think it was annoying how much investors focused 95% of their efforts on the CEO. After all, it’s a joint effort across the whole management company, and the whole team.
But the reality is a great CEO makes the company. A merely good CEO leads to a much worse outcome. And a demotivated CEO means your stock is worth a lot, lot less.