Perkins, Rachel_Headshot.jpgCONTRIBUTED BY
Rachel M. Perkins
rachel.perkins@dlapiper.com

Startups and public companies alike often use equity to help attract, retain and incentivize talented employees and other service providers. The different forms of awards have proliferated in the past several years, though, leading to a confusing “alphabet soup” of jargon that often frustrates both the recipients of grants and the company itself. Many angel and venture capital investors continue to prefer seeing stock options and restricted stock awards in their portfolio private companies, as these are the most common and simplest to administer. Other forms of awards can also be challenging for startups because there is no public market to easily set a contemporaneous per share stock price or provide liquidity for the award recipients. However, while stock options—both nonstatutory (NSO) and incentive (ISO)—and restricted stock awards (RSAs) remain the most popular and most recommended form of equity compensation, other forms—such as restricted stock units (RSUs) and stock appreciation rights (SARs)—are gaining popularity in certain markets, and we are being asked more and more frequently about these alternatives.

Adding to our previous discussions of adopting your first equity incentive plan, NSOs vs. ISOs and options for issuing employee equity in LLCs, we have put together the below quick reference charts, which are intended as high-level summaries of the most common equity incentive awards as well as some of the other less common awards available.  The following charts highlight some of the key features and tax consequences of each type of award, as well as some of the potential drawbacks associated with each:
Continue Reading Equity Compensation Alphabet Soup – ISO, NSO, RSA, RSU and more

Megan Muir.jpgCONTRIBUTED BY
Megan Muir

NY venture capitalist Fred Wilson has an interesting blog post about various approaches to employee equity being considered by some of his fund’s portfolio companies. For now, he comes out in favor of granting stock options instead of restricted stock or other forms of equity. The last few lines reveal some of his investing approach:


Continue Reading Employee Equity Comp – A VC Says be Generous