Size grants from a pool and a hiring plan rather than case by case. Early employees usually receive small percentages that fall with each later hire; senior first hires receive more. In the US this is typically stock options; in Germany often virtual shares. Use public benchmarks such as Index Ventures' Rewarding Talent, and explain the value honestly.
- Grant from a planned pool, not ad hoc.
- Earlier and more senior hires receive more; later hires less.
- US: stock options. Germany: often VSOP; real shares possible.
- Four-year vesting with a one-year cliff is standard.
- Explain value in money and scenarios, not just percentages.
How do you set grant sizes?
- Decide the pool for the next 18–24 months. See the option pool shuffle.
- List planned hires by seniority and timing.
- Allocate the pool across them, keeping a reserve.
- Check against public benchmarks for your region and stage.
How do US and European plans differ?
| US (Delaware) | Germany | |
|---|---|---|
| Instrument | Stock options | Mostly virtual shares (VSOP); real shares possible |
| Exercise | Employee pays strike price | VSOP: no exercise; cash at exit |
| Tax | Depends on option type | VSOP: income tax at payout; §19a EStG deferral for real shares in qualifying companies |
| Vesting | 4 years, 1-year cliff | Same |
Read ESOP vs VSOP in Germany for the details.
How do you explain it to a candidate?
- Number of shares or units and the total outstanding.
- Value at the last round price, and what liquidation preferences mean. See liquidation preference.
- Scenarios: what it could be worth at different exits.
- Vesting, leaver rules and what happens at an exit.
Public benchmarks such as Index Ventures' Rewarding Talent help calibrate. For hiring options, see your first engineering hire.
What should an offer letter say about equity?
- The number of options, shares or virtual units.
- The total fully diluted number, so the percentage can be calculated.
- Strike price (options) or base value (virtual shares).
- Vesting schedule and cliff.
- Leaver rules and what happens at an exit.
- That the plan document governs and is available.
How do you show scenarios honestly?
| Exit value | Value to an employee with 0.5% (after preferences, illustrative) |
|---|---|
| Small exit, below money raised | Possibly zero after liquidation preferences |
| Medium exit | A modest bonus |
| Large exit | Potentially life-changing |
Avoid presenting only the best case. Explain liquidation preferences in plain terms; candidates who understand the downside are more likely to stay when things get hard.
What about refreshing grants?
As the company grows, early grants vest and new hires receive smaller percentages at higher prices. Many companies add refresh grants for strong performers after two to three years. Plan the pool with this in mind: see the option pool shuffle.
What is different in Germany?
Virtual share plans pay cash at an exit and are taxed as salary at payout. Real shares can be granted, and German rules under §19a EStG allow tax deferral for qualifying companies. Explain clearly which one you offer, because candidates who have worked in US companies may assume stock options.
Frequently asked questions
How much equity should a first employee get?
It depends on seniority, salary trade-off, stage and region. Use a planned pool and public benchmarks rather than a fixed rule.
Do German startups give stock options?
Many use virtual share plans instead; real shares or options are possible but more complex.
What vesting schedule should employee equity have?
Four years with a one-year cliff is standard.
How do I explain equity value to a candidate?
Show the number of units, the total outstanding, the latest price, and scenarios at different exit values, including the effect of liquidation preferences.
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Join the waitlist →Sources and further reading. Index Ventures, Rewarding Talent; §19a EStG.
Educational material, not legal, tax or investment advice. Rules and figures change; confirm with qualified counsel or a tax adviser in your jurisdiction before acting. Last updated October 6, 2026.