How Many Shares to Grant Yourself

Much like how many shares to authorize, how many shares to grant yourself and others right at the beginning of your company depends on what you expect for the future. The goal is to grant yourself enough shares of the number authorized that the dilution overtime can be controlled.

For example, 500,000 shares doesn’t sound like a lot for a large multi-million dollar investment. However, if you granted yourself 1M owner shares, then someone taking 500,000 shares means they will be a 1/3 owners. Your stake goes from 100% to 66.67%. Now you may have negotiated for this, but higher numbers tend to give a bit more granularity.

Imagine if you just had a total of 1000 shares authorized and you gave yourself 10 shares. A big investor comes in and you want to give them the same 1/3 ownership. You issue 5 shares and they have 1/3 ownership. In both cases the economics are exactly the same. Scenario A 500k shares = Scenario B 5 shares. However, something about the latter feels very wrong compared to the former. Granting employees 1 share as part of their compensation package seems wrong.

So how many shares you want to grant yourself is definitely a bit of guesswork like authorized shares.

Pro Tip: Don’t grant yourself all the authorized shares. Remember ownership is determined by % of outstanding shares.

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