Seed to series B: a practical guide for sharing equity

Start-ups talk a lot about “equity culture”. In practice, that just means one thing: the people building the business share in the value they create, on terms they can actually understand.

Done well, this is a competitive advantage. Done badly, you get confusion, inconsistent promises and a cap table that throws grit in the machine for the next funding round.

This guide sets out a simple framework you can use from Seed through to Series B: how the funding stages work, what realistic founder dilution looks like, how big your option pool should be and what to grant to your early hires as you scale.

Why equity culture is a strategic decision

High-growth companies are built by owners, not passengers. An equity culture is not about handing out random percentages; it is about:

• Clarity - people know how grants are sized and why.
• Consistency - similar roles at similar levels get similar treatment.
• Manager education - leaders can explain the plan without a lawyer in the room.
• Forward planning - you know when the pool needs topping up, well before the next fundraise.

If you cannot explain in one slide how equity is allocated by level and geography, you do not yet have an equity culture - you have a collection of one-off deals.

Funding rounds in plain English

You don’t need to be a VC to understand the alphabet.

• Seed - capital to prove the idea. Tiny team, highest risk, biggest potential upside.
• Series A - product is working; the focus is building a real team and repeatable sales motion.
• Series B - scaling people, systems and infrastructure; risk drops, expectations rise.
• Series C+ - still growing quickly, but now with a clearer line of sight to exit or IPO.

Each round brings in new shareholders and more capital. That’s dilution: your percentage ownership reduces so the overall pie can grow. The mistake founders make is treating dilution as something that “happens to them” rather than a set of numbers they can plan around.

Founder dilution: plan it, don’t panic about it

There is no perfect template, but the ranges below are broadly market-standard:

• After Seed: founders together holding c. 50-60%
• After Series A: c. 30-40%
• After Series B: c. 20-25%

If those numbers feel tight, the levers you can actually pull are:

• Round size - raise what you need, not what looks good in a headline.
• Burn discipline - every pound you don’t burn is a pound you don’t need to raise.
• Timing - delay the next round until you’ve genuinely de-risked the business and can justify a step-up in valuation.

On founder splits, equal ownership is common and often cleanest. Where one founder is taking a materially bigger load (CEO role, primary sales engine, core IP etc.), a modest premium can be justified. The key is to write down the rationale on day one and align expectations before the cap table gets crowded.

The option pool: your hiring oxygen

Your option pool is the part of the company reserved for employees. Too small, and hiring slows because you cannot make competitive offers. Too large, and you’ve given away equity you didn’t need to.

• A pragmatic pattern:
• Seed: reserve 10-15% for the pool.
• Post-Series A: aim to keep ~10-12% unallocated.
• Post-Series B: ~6-8%.
• Post-Series C: ~4-6%.

A simple governance rule: schedule a “pool refresh review” one quarter before each fundraise. If you wait until you are negotiating the term sheet to discuss the pool, you will find yourself trading valuation against pool size under pressure.

The first ten hires: publish ranges and stick to them

Your first hires are making a real career bet on the company. They also set your internal precedent.

One effective approach is to agree grant ranges for hires 1-10 and publish them internally:

• Hire 1: 1.0-2.0%
• Hire 2: 0.8-1.2%
• Hire 3: 0.5-0.8%
• Hire 4: 0.4-0.6%
• Hire 5: 0.3-0.5%
• Hires 6-10: 0.15-0.35% each

Two guardrails keep this sensible:

• Hires 1-5 together should be ≤ ~4%.
• Hires 1-10 together should be ≤ ~5%, leaving room for later executives and refresh grants.

Role nuance matters: product and engineering usually sit towards the higher end of the range; general and administrative are mid-band; pure sales roles often prefer more cash and less equity.

After ten people: stop arguing about decimals

Once you are beyond the first ten employees, percentage-based conversations (“I want 0.31%, not 0.28%”) become unproductive. A cleaner method is to:

1. Express equity as a value linked to salary, and then
2. Convert that value into a percentage using your current valuation and fully diluted share count.

A workable framework:

• C-suite (non-CEO): 0.7-2.0× salary
• Directors / Heads: 0.5-1.0×
• Senior specialists / scarce skills: 0.2-0.5×
• Others: 0.05-0.2×

Worked example

• Company valuation: £20m
• Fully-diluted shares: 20,000,000 (i.e. £1 per share)
• Head of Engineering on £120k base
• Grant policy: 0.75× salary → £90k equity value

Grant % = £90k / £20m = 0.45%

At a £200m exit, that 0.45% becomes c. £900k gross before tax.

This is the level of clarity that belongs in an offer letter: “Here’s the notional value today, here’s the percentage and here’s what it could be worth at different exit outcomes.”

Vesting, leavers and refresh: get the hygiene right

The mechanics matter just as much as the numbers.

• Vesting structure: 4 years is still standard, with a 1-year cliff and monthly vesting thereafter. Leave before the cliff and nothing vests; after the cliff, the vested portion is yours (subject to local tax rules).
• Refresh grants: small, predictable top-ups (for example, 0.05-0.25% equivalents per year) are better than irregular windfall awards.
• Underwater options: decide in advance whether you will consider repricing or exchanging underwater options if markets move against you.
• Exercise window: where cash and tax allow, giving departing employees 6-12+ months to exercise vested options (unless they are dismissed for cause) is increasingly seen as fair practice.

Good leaver/bad leaver rules and buy-back mechanics need to be drafted carefully to avoid triggering unexpected employment tax charges, especially in Europe.

The overseas twist: don’t ignore local rules

Once you are hiring across borders, the plan has to work with local tax and employment law, not fight it.

Key points:

• Instrument choice: use tax-advantaged options where available; if not, consider growth shares, RSUs or cash-settled phantom plans.
• Mobility: people move countries. Set out clearly what happens to vesting, payroll withholding and tax if an employee relocates mid-grant.
• Consultation and filings: build works council processes, securities filings and registrations into your hiring and grant timetable - particularly in continental Europe.
• Leaver definitions: keep “Cause” tight, treat genuine good leavers proportionately and design buy-backs with an eye on local income tax rules.

A simple board checklist

If you sit on the board or Remco of a growing company, the following questions are a useful starting point:

1. Ownership targets: do we have explicit ownership targets for founders and staff at Seed, Series A and Series B?
2. Pool path: have we agreed our starting pool size and when we expect to top it up?
3. Grant framework: are the early-hire ranges documented and do we use salary-linked grant values thereafter?
4. Communication: do offer letters explain the maths in plain English - value, percentage and scenario outcomes?
5. Review cadence: do we revisit the framework annually to keep it fair, simple and compliant as the company matures?

Get those basics right and you move from ad-hoc negotiations to a coherent equity strategy that supports hiring, retention and future fundraising.

At Burges Salmon, we work with founders, boards and investors to design equity frameworks that are simple, scalable and investor-ready - from first option pool through to Series B and beyond. We combine incentive design, tax and governance advice so that your cap table supports hiring, retention and future fundraising, rather than getting in the way of it.