CEO Equity

TL;DR

The equity stake held by the CEO, typically the largest individual founder share, that gradually dilutes through successive funding rounds.

CEO equity starts at the founding split (often 30 to 70% depending on team size) and dilutes through successive rounds. By Series C, founder CEOs typically own 10 to 25% of the company. By IPO, 5 to 15% is common. Maintaining a meaningful CEO stake matters both for incentive and for the optics of long-term commitment.

When a founder CEO is replaced by an external CEO, the equity terms (size of grant, vesting, severance, acceleration) become a strategic question handled by the board's compensation committee.

Worked example

An outside CEO joins a Series-A SaaS as CEO #2 (founder steps to CTO) with a 5% fully-diluted grant: 4-year vesting, 1-year cliff, double-trigger acceleration on change of control. Top up at Series B and Series C is expected if performance metrics are met.

Common pitfalls

• Diluting the CEO stake to a level that breaks long-term incentive.
• Failing to refresh CEO grants at later stages when initial vesting completes.
• Mixing founder common with later option grants without clear documentation.

When this shows up in a pitch deck

Founder ownership rarely appears on the deck; it shows up in cap-table modeling and diligence.

Related terms

• Founder, A person who started or co-started the company and (typically) holds founder common stock subject to founder vesting.
• Co-Founder, An additional founder who joined at or near the company's inception, typically holding founder common stock and a meaningful equity stake.
• ESOP, Employee Stock Option Plan, the legal structure that lets a company grant options to employees at a defined strike price, governed by board approval and 409A.
• Vesting, The schedule by which equity grants are earned over time, typically 4 years with a 1-year cliff for founders, employees, and advisors.
• Dilution, The reduction in an existing shareholder's ownership percentage caused by issuing new shares in a financing or an option grant.

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