'AITA for refusing to give my early employee more equity? I gave a big package to a new hire.'

"AITA for refusing to give my early employee more equity even though I just gave a big package to a new hire?"

I (28m) run a small startup in north EU. I started it in my apartment like three years ago. Total scrappy vibes. ramen budget. the whole thing. One of my first hires, let’s call her L, joined when I literally had no funding and was paying people from a tiny grant and my own savings. She stuck around. she worked hard. Honestly she did help build a lot of the early stuff.

Back then I gave her a small equity grant because that was all I could do. It wasn’t huge. but it was “founder friendly” whatever that means. At the time she was fine with it. Fast forward. we raised two rounds. Lots of dilution. her shares basically turned into tiniest-sliver-ever territory. Embarrassing if you do the math.

She pulled me aside last week and asked for an equity refresh. She said she’d been loyal, that she literally helped keep this thing alive when it was just me and her eating cheap noodles at 2am. She said it feels demoralizing seeing her slice shrink to basically zero.

I told her we don’t do equity refreshes for early hires. I said it would be messy and set precedents. I basically gave her the whole business logic spiel. Keep things clean. No emotions. yada yada. Then she found out (because of course she did) that I just gave a big equity package to a new senior person coming from Some Famous Company.

I told her it was necessary to attract top talent. She got super quiet and then said this made her feel like dirt. Like loyalty basically counts for nothing here. She told me she’s reconsidering staying unless I “make it right.” I told her this is just how startups work, and that she’s being kinda emotional about it. She didn’t like that at all.

My friend says I’m being cold and stupid because L basically held the company together early on and now I’m acting like she’s replaceable. Another friend says I need to stay consistent or everyone will start expecting special treatment. So now I'm sitting here wondering…am I actually TA? Or is this just business and she’s taking it personally?

Here's what people had to say to OP:

HCpwny wrote:

That is absolutely not how start-ups work. You have misinterpreted how to give equity to early contributors. YTA and you absolutely are showing her that loyalty means nothing to you. Someone else said it better..you should have given her a different class of share so it wasn't diluted just by hiring someone.

There is absolutely no reason why someone just coming in at this phase should have more compensation than someone who worked through the start of things when there was no guarantee things would even make it to this point. If you're struggling with this concept now, I fear for the future of your business.

ScaryButterscotch747 wrote:

YTA. You are definitely TA. Firstly you should have given her a separate class of shares so that her portion would not dilute. Secondly, you just showed her that you do not value loyalty or corporate knowledge. That big hire will be gone in 18 months to 3 years because that’s what upwardly mobile people do. Can you afford to lose both of these employees?

Archivist-exe wrote:

YTA you suck dude, way to become the disgusting business owner who loses all of his soul. What the actual hell is wrong with you?!?? You have now USED AND EXPLOITED this woman and can't even be decent to do the bare minimum corrections?

God I hope she leaves and everything you have crumbles to the ground. I can't wait to see your posts in the future about how your business failed because your core team dipped on you because you treated them like crap.

EDIT: I've worked for 3 start ups and even they exploit4ed me less than your piss baby bad-business loyalty-punishing self.

jubal2000 wrote:

Yep, YTA, a self-serving one at that. Absolutely awful way to treat someone who committed themselves to your dream and worked their ass off to make it happen. The message it sends to every employee, regardless of tenure is that you don't give a crap about their contribution, their loyalty or anything else, good luck hiring or retaining anyone with any self-worth.

BTW, it's not even remotely close to how startups work, the attraction of startups is ground floor equity with real value to make up for the crap pay and crap hours.

AuspicaMagic wrote:

YTA - you are telling her that you don't value her or her contributions, that she's not "top talent" and basically that she's dirt. The whole idea of giving key people equity in the early days is so that there's a substantial payoff down the road if the company succeeds. Now that it has you've reduced that pay off to minimal levels for her and given the bigger one to the johnny-come-lately instead.

badhouseplantbad wrote:

YTA. Yes you are TA because you didn't make her equity in non-dilution shares which you should have because you called them founder friendly, and that you described as her helping found the place. But you just basically told her that all her work is worthless. Your reputation will take a major hit if she leaves and she will if you don't make it correct quickly, like by the end of the day.

kiwigoesonpizza wrote:

YTA, but you already knew this. Since this is how it is in start ups, right? You have every valid reason to make this right, but chose not to. She needs to just leave and use the experience to her benefit with a company that will treat her better.

You had top talent the whole time, but you would rather give reward to someone who has no proven loyalty. Someone who left "Famous Big Company" doesn't seem as loyal as the person who sat in your crap, with you. This is your crap that she sat in so you wouldn't be alone and fail.

But hey, Big Famous Company guy should get a big slice of this pie, cuz his loyalty to Big Famous Company was worth about that much, right? You think he's going to sit in the shit with you at 3am with some cold noodz? No, he's going to take the offer package from the next company.

slartibartfast0372 wrote:

YTA.

"I told her we don’t do equity refreshes for early hires"

How many early hires do you have? I can't see how this would get "messy" as you say considering you have so few employees. You admit how much she helped to us but you treat her the opposite and minimize her contributions and loyalty. You're lucky she hasn't already quit.