The Entrepreneur’s Manual has another powerful idea, one that I have never seen implemented. In all my years of working in and around high tech companies, I can’t think of a single one that has ever rewarded employees and teams with stock options based on achieving milestones; rather, all the options plans I have ever seen are based on a 3-4 year vesting schedule. As long as you don’t get fired, you get the stock, month after month.
Richard White says the best way to grant stock to employees is when they achieve pre-set milestones. One milestone might be shipping a quality product. 50,000 shares are issued. Another might be getting 2% market penetration. Another 50,000 shares. Then getting to positive cash flow for 3 consecutive months: 100,000 shares. Minimum profits of $100,000 per quarter: another 100,000 shares. Raising outside capital and making a competitive acquisition could have shares assigned to it. Every major and even minor milestone has some shares assigned to them.
Every milestone reached would result in shares being issued and divided among employees based on pre-determined ratios. If a company achieved all of its major milestones in the first year then the employees would celebrate having the entire stock option pool vested in one year–instead of four–but the investors should be happy too because the company reached all of its objectives much more quickly than they had expected.
I’ve got to learn more about this concept and whether it is used anymore. I love the idea of motivating teams to achieve results and not just pass time.
Who knows anything about this kind of stock option plan?