AI Summary
→ WHAT IT COVERS Yuri Sagalov, General Catalyst's seed investment managing director, covers how founders should structure cap tables, cofounder equity splits, early employee compensation, and investor selection from day one. He draws on experience across hundreds of startups at Y Combinator, Wayfinder Ventures, and General Catalyst to provide concrete structural guidance. → KEY INSIGHTS - **Early Employee Equity:** Give first two to three hires significantly more equity than instinct suggests — 2% instead of 0.25–0.5%. These hires set company culture and ideally stay through IPO. Hire slowly and deliberately for these roles because their values and work style will define the organization's long-term operating norms and retention patterns. - **Cofounder Equity Splits:** Keep cofounder splits as close to equal as possible, even if one person originated the idea. An 80/20 split creates resentment over a 10–15 year journey. Designate one person as CEO to break deadlocks, and establish a clear framework for disagreeing and committing before conflict arises under pressure. - **Cap Table Dilution Limits:** Target no more than 20–25% total dilution by the seed round across all pre-seed investors, advisors, and friends-and-family participants. Beyond 25%, investors begin questioning why founders hold such a small stake before the company has scaled, and unwinding messy early cap tables is extremely difficult post-formation. - **Advisor Equity:** Default to not granting equity to advisors. Most advisors provide value for three to six months, then engagement drops sharply, yet equity is permanent. Pay advisors hourly or on success-based terms instead. Exceptions apply in regulatory, government, military, or enterprise contexts where specific advisors open doors unavailable through other means. - **Hiring Timing:** Hire only when the pain of not hiring becomes undeniable — a packed calendar with no capacity left. Avoid hiring ahead of product-market fit, particularly in sales. A strong sales team pushing a product without product-market fit generates customers who churn, creating a destructive cycle that damages morale and burns runway simultaneously. → NOTABLE MOMENT Sagalov reframes startup job security by arguing that a well-funded startup with two to three years of runway can offer more employment stability than a Fortune 500 company, which faces public shareholder pressure and executes layoffs to move stock prices regardless of individual performance. 💼 SPONSORS None detected 🏷️ Cap Table Strategy, Startup Equity, Early-Stage Hiring, Cofounder Relationships, Seed Stage Investing