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Background Note | HBS Case Collection | March 2015

Equity Compensation in Startup Ventures

by Ramana Nanda, Robert White and Stephanie Puzio

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Abstract

Setting equitable and "market" level compensation for founders and early employees of startups is one of the most important elements of a new venture. It is not only central to attract and retain the best human capital for the startup, but is critical to align incentives between investors and management. This note provides a framework to think about compensation in startup ventures and is intended for entrepreneurs thinking about starting a venture, as well as for employees looking to join a young high-potential startup.

Keywords: entrepreneurial finance; equity; Finance; Entrepreneurship;

Language: English Format: Print 14 pages EducatorsPurchase

Citation:

Nanda, Ramana, Robert White, and Stephanie Puzio. "Equity Compensation in Startup Ventures." Harvard Business School Background Note 815-074, March 2015.

About the Authors

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Ramana Nanda
Sarofim-Rock Professor of Business Administration
Entrepreneurial Management

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Robert F. White
Senior Lecturer of Business Administration
Entrepreneurial Management

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More from these Authors

  • Technical Note | HBS Case Collection | November 2017 (Revised November 2018)

    Blockchain, Cryptocurrencies and Digital Assets

    Ramana Nanda, Robert F. White, Alexey Tuzikov, Ramana Nanda, Robert F. White and Alexey Tuzikov

    Keywords: Blockchain; cryptocurrency; Initial Coin Offering; ICO; Finance; Entrepreneurship; Financial Services Industry;

    Citation:

    Nanda, Ramana, Robert F. White, and Alexey Tuzikov. "Blockchain, Cryptocurrencies and Digital Assets." Harvard Business School Technical Note 818-066, November 2017. (Revised November 2018.)  View Details
    CiteView DetailsEducatorsPurchase Related
  • Technical Note | HBS Case Collection | November 2017 (Revised November 2018)

    Blockchain, Cryptocurrencies and Digital Assets

    Ramana Nanda, Robert F. White, Alexey Tuzikov, Ramana Nanda, Robert F. White and Alexey Tuzikov

    Keywords: Blockchain; cryptocurrency; Initial Coin Offering; ICO; Finance; Entrepreneurship; Financial Services Industry;

    Citation:

    Nanda, Ramana, Robert F. White, and Alexey Tuzikov. "Blockchain, Cryptocurrencies and Digital Assets." Harvard Business School Technical Note 818-066, November 2017. (Revised November 2018.)  View Details
    CiteView DetailsEducatorsPurchase Related
  • Article | Harvard Business Review (website)

    The Hidden Costs of Initial Coin Offerings

    Jeffrey J. Bussgang and Ramana Nanda

    In recent years, much has been written about how the Blockchain is poised to transform traditional industries such as banking, real estate, and healthcare. More recently, it has gained attention as a way to finance new ventures, through what is known as an Initial Coin Offering (ICO). Less noticed, though, is ICOs appear almost antithetical to the standard approach to financing a risky venture. Structured experimentation, popularized by Eric Ries' The Lean Startup, has been widely embraced as the gold standard for how to approach the commercialization of radical new ideas. From Boston to Beijing to Bangalore, entrepreneurs and investors rattle off the importance of designing focused experiments to test hypotheses in a capital-efficient fashion in order to achieve product-market fit. But ICOs substantially limit the benefits associated with such staged experimentation, for three reasons.

    Keywords: Initial Coin Offerings; Business Ventures; Entrepreneurship; Finance;

    Citation:

    Bussgang, Jeffrey J., and Ramana Nanda. "The Hidden Costs of Initial Coin Offerings." Harvard Business Review (website) (November 7, 2018).  View Details
    CiteView Details Register to Read Related
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