This post is my reasoning why a web startup founder should make sure they feel the pain when it comes to share options with their new business and love it.
A web startup has some key ingredients for success: the quality of the development, speed of entry to market, stability and support are some of the key areas you will have to nail. So how can you make sure your developers are focused on the same deliverables ? Simple offer a good share option and lower then market rate. Its amazing how much this is a good thing for a business. I love sitting around a planning table hearing developers say “We have to get this to market” and “how does that get us more money”. These are things that helps entrepreneurs keep themselves on track as well.
A great benefit of share options is it makes you as a founder truly test the value of your ideas, its funny when you here developers say “Im not sure if this will work” but at the same time happy to send the invoice each month to get their money. I wouldnt want developers that dont believe working on my projects ever. So when a developer does take the shares it means they believe in your dream and you should be using this as the first investor pitch to test your idea. If you cant convince developers to invest then maybe you will struggle at getting angel investors at a later date or maybe you shouldnt be investing your time and money as well.
Dont forget share options can have vesting clauses, which means they will only get them when certain conditions are met such as length of employment. These clauses has two benefits, firstly it makes people stick around so you dont lose key people too early which helps with the support and stability issues we talked about earlier and second it also sounds a warning when staff has lost faith in the business. If an employee wants to leave and hence loses what you perceive as hundreds of thousands of dollars worth of shares, it sends the very strong signal they dont believe and other staff may feel the same they just never tell you.
As a developer and I own a small stake in a business, I can tell you I want the major stakeholder to make millions because then so do I. Can you say your development team thinks the same about your project ?