What does it truly mean to have a 4% stake in a company?

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JASON LEMKIN

It means you owe it to yourself, and everyone working at and with the company, to do whatever it takes to make it a success.

4% may not sound like a lot in the early days, if there are just say 2 employees. But what you’ll see later as you scale is you will end up one of the largest shareholders in the company.

The pie only adds up to 100%. Once you have 50, 100, 300 employees … go through 2–3 rounds of investment … basically no one will own 4%. At best, 2–4 people. (Yes, your 4% will get diluted, but even so).

And if this tiny start-up somehow becomes a unicorn … that’s 4% (call it even 3% diluted) of $1b. That’s $40 million dollars.

The bottom line is equity doesn’t always seem precious in the early days, but it is.

The company will hire SVPs in the coming years with decades of experience that will get far less equity than you. Even your VCs as individuals, once you understand how VC really works, will own less personally after writing seven and eight figure checks.

4% is an obligation. An obligation to do whatever you possibly can to win.

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Published on March 14, 2017
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