Compensation the David Sacks Way: Startup Hiring Plan, Equity Bands, and Sales Quotas That Work

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David Sacks compensation advice is famous because it gives founders a concrete way to pay, hire, and drive performance without breaking the company.
I wrote this guide to show you how I operationalize that philosophy in the real world.
You will get a full hiring plan by stage, equity bands that scale, a practical sales quota model, and a governance system to keep everything aligned.
I will also show mistakes I see every week and how to avoid them.
If you want a no-nonsense playbook for startup org design and HR strategy, you are in the right place.

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1) Why “David Sacks compensation” resonates with founders

Founders ask me for “the David Sacks way” because it blends discipline and speed.
It cuts fluff and focuses on what moves ARR, runway, and product velocity.
His compensation philosophy is pragmatic, stage-aware, and tied to measurable outcomes.
It avoids the two traps that kill startups: overpaying for prestige and under-investing in function-critical roles.
I follow that same approach because it keeps the business scorecard aligned with hiring, equity bands, and sales quotas.

   
• Simple rule: Pay top talent fairly, tie cash to outcomes, and preserve equity for value creation stages.
   
• Stage matters: What works at seed does not work at Series B.
   
• No vanity hires: Titles do not close deals or ship features.
 

For more on org design by stage, see our blog post: Startup Org Charts by Stage.

2) The philosophy behind compensation the David Sacks way

This philosophy starts with clarity on the company’s objective for the next 18 months.
Compensation then becomes a mechanism to achieve that objective, not an HR vanity project.
The stack is simple.
Define the plan of record.
Map roles to that plan.
Set cash and equity bands that reflect impact and scarcity.
Design ramp and quotas that make your revenue plan real.

   
• Cash is for retention and focus. It removes money anxiety so people can execute.
   
• Equity is for alignment and upside. It rewards company value creation, not just activity.
   
• Variable is for outcomes. It pays when the scoreboard moves.
 

When compensation is designed this way, recruiting becomes faster, performance improves, and you avoid random walk hiring.
I have watched Series A companies hit plan for the first time in years after switching to this model.

3) Zero-to-one hiring plan: who to hire and when

Here is the seed-to-Series A blueprint I use.
This is a stage-aware hiring plan with clear sequencing and ratios.

   
• Pre-seed: Founder/CEO, founding engineer, design/PM hybrid, and a part-time finance/ops contractor.
  No sales yet unless you are enterprise with six-month cycles.
   
• Seed: 3–5 engineers, 1 PM, 1 designer, 1 founder-led AE if motion supports it, and 1 customer success generalist.
  Hire a fractional recruiter, not a full HR team.
   
• Post-seed to Series A: Add 1–2 AEs, 1 SDR, 1 product marketer, 1 RevOps, and 1 finance lead.
  Start building a small CS team and formal QA.
 

Keep hiring tied to the product and revenue milestone you must prove next.
If you cannot connect a role to the next ARR step-up or core product milestone, you are probably hiring too early.
For more on planning cash needs around hiring, see our blog post: Runway Calculator: How Much to Raise for 18–24 Months.

4) Headcount planning across product stages

I anchor headcount to product maturity because it prevents premature scaling.
Use this ladder to time hiring.

   
• Prototype: Mostly engineering and design.
  Zero quota-carrying sales.
  Founder validates demand.
   
• MVP: Add PM and CS.
  One AE who sells founder-sourced leads.
  No big marketing spend yet.
   
• Product-market fit proof: Add SDRs and 2–4 AEs.
  Formalize onboarding, ICP, and pricing.
  Start RevOps early.
   
• Scale: Split new logo and expansion motions.
  Introduce enablement, QA, and data analytics.
  Centralize recruiting.
 

Tie hiring gates to objective proof like win rates, payback, and retention.
If your CAC payback slips over 24 months, pause GTM hiring and fix the funnel.
This is how you avoid headcount-driven burn spirals.

5) Equity bands that scale with growth

Equity bands are the backbone of fair offers and internal parity.
I use tight bands by level so you move faster and keep your cap table clean.

   
• IC Levels (L1–L6): 0.01% to 0.5% depending on stage and criticality.
  Engineers and product roles typically sit at the higher end early.
   
• Managers (M1–M3): Slight bump over IC peers due to span of control.
  Still avoid outsized grants unless they are 10x hires.
   
• Execs: VP 0.5%–1.5%, C-level 1%–3% at seed, declining each round.
  Tie more of their comp to milestones and vesting cliffs.
 

Keep bands transparent internally by level but not by person.
Use 409A to price options fairly.
Refresh grants every 24–36 months to retain top performers and match market drift.

6) Leveling framework to anchor equity and cash

Leveling prevents ad hoc decisions and inequity.
I keep it simple with six IC levels and three management bands.
Each level has scope, impact, and autonomy markers.

   
• Scope: What size problem do they own.
  A feature, a system, or a domain.
   
• Impact: ARR influence, reliability, and customer outcomes.
  Tied to metrics, not vibes.
   
• Autonomy: Can they set direction or need direction.
  Fewer check-ins at higher levels.
 

Plug leveling into your equity bands and salary bands.
This makes offers fast and reduces negotiation drama.
It also protects managers from exceptions that trigger internal churn.

7) Benchmarking compensation without overpaying

Use multiple sources, not a single survey.
I triangulate from compensation databases, recruiter intel, and actual offers accepted in my network.
For seed and Series A, pay between the 50th and 75th percentile on cash.
Make your equity do the heavy lifting.
Avoid “unicorn inflation” salaries until your metrics justify them.

   
• Rule of one offer: If someone claims a sky-high competing offer, ask for documentation.
  If they cannot share, they usually do not have it.
   
• Geo adjustments: Pay for role value first and location second.
  Do not compress high-impact roles because they are remote.
   
• 409A cadence: Refresh every 12 months or after a financing.
  Keep option pricing clean.
 

8) Offer construction: cash, equity, and cliffs that hold up

Every offer I send has three lines: base, variable (if applicable), and equity.
I include vesting, cliffs, and exercise windows in writing.
I never leave this to verbal promises.

   
• Vesting: 4 years with a 1-year cliff, then monthly.
  Use early exercise if you can support the admin.
   
• Exercise window: 90 days standard, longer if you want to stand out.
  Explain tax implications clearly.
   
• OTE for sales: 50/50 base-variable is standard.
  Keep OTE aligned to quota capacity and payback.
 

I once coached a seed CEO who offered big cash to land a flashy VP.
They under-granted equity and set no cliff.
The VP churned in 7 months and kept a chunk of options.
We rewired offers with cliffs and milestone-based sign-on equity, and hiring stabilized.

9) Sales quotas that actually work

Quota math is where most founders guess.
I use a simple capacity model.
Start with ACV, win rate, ramp time, and pipeline coverage.

   
• Pipeline coverage: 3x for new logos, 1.5x–2x for expansion.
  Lower coverage only if your win rate is proven and stable.
   
• Ramp: 50% in Q1, 75% in Q2, 100% in Q3 onward.
  Do not pretend a new AE is full capacity in 30 days.
   
• Quota: Set to 4–6x OTE for mid-market.
  For enterprise with long cycles, 3–4x OTE is more realistic.
 

Test quotas against historical attainment.
If more than 70% of reps exceed quota, you set it too low.
If less than 30% hit, you set it too high or your funnel is broken.
For a deeper view on GTM sequencing, see our blog post: First 10 GTM Hires for B2B SaaS.

10) Territory design and capacity planning

Great quotas fail without fair territories.
I use a hybrid approach that mixes named accounts and firmographic rules.
Keep territories stable for at least two quarters to measure performance.

   
• Named accounts: Assign strategic targets to avoid chaos.
  Protect key logos from being poached internally.
   
• Inbound carve-out: Rotate inbound by rep to reduce luck.
  SDRs route by rules, not relationships.
   
• Capacity: 1 manager for every 6–8 AEs.
  1 SDR for every 2–3 AEs when velocity is high.
 

Rebalance only at Q boundaries unless a rep leaves.
Sudden territory changes destroy trust and attainment.

11) SDR, AE, and CSM ratios and ramp

Ratios depend on ACV and cycle length, but here is a solid baseline.
Use this until you have your own data.

   
• SDR:AEs: 1:3 for enterprise, 1:2 for mid-market, 1:1 for SMB velocity engines.
   
• CSM Load: 1 CSM per $2–4M of ARR for mid-market, 1 per $1–2M for enterprise.
  If churn is high, lower the load.
   
• Ramp time: SDR 2 months, AE 3–4 months, CSM 2 months.
  Adjust if your product is complex.
 

Tie enablement to ramp.
If enablement is ad hoc, ramp doubles and attainment lags.
That is an expensive way to learn.

12) Comp plans for sales with accelerators and guardrails

Good comp plans are boring.
They are simple, predictable, and pay for the right behavior.
Here is the template I use.

   
• Structure: 50/50 base-variable with quarterly payout.
  SPIFFs are temporary and targeted.
   
• Accelerators: 1.5x payout over 100% of quota, 2x over 120%.
  Cap discounting to avoid buying deals.
   
• Guardrails: Pay on ARR collected, not bookings, unless billing terms are clean.
  Protect gross margin.
 

Make the comp plan one page.
If it needs a lawyer to decode, reps will game it, not live it.

13) Founder and executive compensation that scales

Founders often underpay themselves then overpay executives.
Both hurt.
Pay yourself a livable salary and keep equity for the long-term outcome.
For executives, tie more comp to milestones and less to guaranteed cash.

   
• Founder salary: Enough to remove stress, usually $120k–$180k post-seed in the US.
  Raise gradually with stage.
   
• Executive equity: Right-size grants, avoid front-loaded cliffs, and add refresh after 24 months.
  Tie bonus to ARR and gross margin.
   
• Board visibility: Share a simple exec comp dashboard quarterly.
  Avoid surprises.
 

For governance and KPI reporting, see our blog post: SaaS Metrics That Actually Matter.

14) Early engineer offers and dilution math

Engineers hired before product-market fit are special.
They take more risk and shape the product DNA.
I give them higher equity within bands and clear impact charters.

   
• Seed-stage equity: 0.25%–0.75% for senior ICs who drive core systems.
  Less for peripheral roles.
   
• Dilution lens: A 0.5% grant at seed dilutes to ~0.2% at Series B but is still life-changing if the company works.
  Be transparent.
   
• Retention: Refresh grants at 24 months tied to product milestones.
  Avoid one-and-done options.
 

Walk candidates through dilution with simple examples.
It builds trust and speeds acceptance.

15) Option pool sizing and refresh grants

Pool size is a negotiation with your investors and yourself.
My rule is to size for 12–18 months of planned hiring plus a 10% buffer for must-win candidates.

   
• Seed pool: 10%–15% post-money is common.
  Raise the pool before the round to avoid hidden founder dilution later.
   
• Refresh budget: Reserve 2%–3% for refresh and promotions yearly.
  Do not raid this for new hires.
   
• Board policy: Approve refresh cadence and eligibility early.
  Consistency beats ad hoc exceptions.
 

For more cap table planning, see our blog post: Option Pools, Pro Rata, and Founder Dilution.

16) Retention: promotions, refresh, and career ladders

Retention is a system, not a perk.
People stay when they see growth in scope, compensation, and mastery.
The David Sacks compensation approach leans on predictable ladders and scheduled reviews.

   
• Promotion windows: Twice a year with clear criteria.
  No surprise title changes in hallway conversations.
   
• Refresh grants: Award on merit and market drift, not tenure alone.
  Tie to big wins or expanded scope.
   
• Career narratives: Document the next 12–18 month growth plan per person.
  Managers own this.
 

Do this and you spend less on backfilling and recruiters.
Your culture shifts from negotiation to performance.

17) Remote vs in-office compensation philosophies

Pick a philosophy and stick to it.
I see three workable models.

   
• HQ pay everywhere: Simple and attractive.
  Costs more but reduces friction and relocations.
   
• Geo-indexed: Pay bands by cost-of-living zones.
  Needs strong communication to avoid resentment.
   
• Role-first hybrid: Critical roles anchored to HQ band, others geo-indexed.
  More complex but balances budget and fairness.
 

Whatever you choose, publish the policy.
Consistency is worth more than squeezing a few dollars per head.

18) International hiring and local market rates

International teams unlock speed and resilience.
Pay locally competitive cash and keep equity in USD terms to simplify.
Use EOR partners for compliance early.
Transition to entities when headcount and revenue justify it.

   
• FX risk: Hedge with USD-pegged equity and periodic cash adjustments.
  Communicate changes proactively.
   
• Benefits parity: Match the spirit, not the letter, of benefits across countries.
  Focus on healthcare, PTO, and parental leave.
   
• IP protection: Standardize assignment agreements globally.
  Do not skip this.
 

This is where a strong HR strategy earns its keep.
Bad paperwork here creates existential risks later.

19) Org design that supports the plan: pods, squads, and GM models

Org design drives throughput.
I like small cross-functional pods aligned to outcomes.
Each pod owns a metric like activation, expansion, or a key workflow.
Sales and CS mirror this with industry or segment squads.

   
• Why it works: Clear ownership reduces handoffs.
  Data and decisions sit closer to the customer.
   
• GM model: When you scale, put a GM on a segment with P&L-lite responsibility.
  Keep finance as the control tower.
   
• Communication cadence: Weekly pod reviews, monthly business reviews, and a quarterly all-hands tied to the plan of record.
 

For more on org operating rhythms, see our blog post: Price-Led Growth: A Practical Guide.
Pricing is an org design problem as much as it is a finance problem.

20) Metrics, dashboards, and governance for compensation

What gets measured gets managed.
Build one compensation dashboard that blends people and revenue data.
Share a trimmed version with the board.

   
• People metrics: Offer acceptance rate, time-to-fill, attrition by level, and refresh grant coverage.
   
• Sales metrics: Attainment distribution, ramp progress, CAC payback, and gross margin by cohort.
   
• Equity metrics: Pool remaining, burn per hire, and refresh utilization vs budget.
 

Review monthly with leadership.
Adjust bands and quotas quarterly based on leading indicators, not anecdotes.

How I pressure-test a compensation plan before rollout

I run five stress tests before launching a new plan.
This catches 90% of implementation issues.

   
• Equity drift: Model grants over 24 months.
  Ensure the pool does not run dry before the next round.
   
• Quota realism: Back-test against the last two quarters of pipeline and win rates.
  Adjust for seasonality.
   
• Offer speed: Can you issue a compliant offer within 48 hours of a verbal yes.
  If not, fix templates.
   
• Edge cases: Cross-functional roles, split deals, and SPIFFs.
  Document decisions to prevent one-offs.
   
• Manager load: Do managers have bandwidth to coach and run reviews.
  If not, your plan will not stick.
 

A simple example: turning a messy Series A into a repeatable machine

A Series A SaaS company I advised had 14 AEs, no RevOps, and a 29% attainment rate.
Equity grants were random and the option pool was down to 2%.
We did three things in 60 days.

   
• Re-leveled the team: Set clear bands and moved under-leveled people up with refresh grants.
  Clarity increased morale immediately.
   
• Reset quotas and territories: We re-cut territories by segment, set 3x pipeline coverage, and implemented ramp quotas.
  Attainment hit 61% next quarter.
   
• Rebuilt the pool: Expanded to 10% in the next financing with a board-approved refresh policy.
  Offers became competitive again.
 

The CEO went from constant exceptions to a lightweight system.
That is the power of a disciplined compensation and hiring plan.

Comp pitfalls I see every week (and how to fix them)

   
• Over-titling early: VP titles for senior ICs lock you into expensive backfills.
  Use scope-based titles instead.
   
• Ignoring 409A timing: Delayed valuations create tax headaches and slow offers.
  Schedule 409A updates.
   
• Quota sandbagging: Managers lowball targets to look good.
  Use board-reviewed capacity plans.
   
• Equity opacity: Vague equity talk erodes trust.
  Show candidates a simple dilution model.
   
• Culture of exceptions: Every exception becomes policy.
  Write rules and stick to them.
 

How to communicate compensation with credibility

Compensation fails if communication fails.
I keep a simple three-part message.

   
• Philosophy: We pay for impact, align with equity, and reward outcomes.
  Here is how that shows up in your offer.
   
• Mechanics: Bands, levels, vesting, and variable comp.
  One-page summaries beat slide decks.
   
• Fairness: How we prevent bias and ensure parity.
  Show the process, not just the result.
 

When candidates and employees understand the system, they stop negotiating every detail and start focusing on the work.

Sales enablement: the overlooked half of quota success

Quota fails without enablement.
I treat enablement as a product.
It has ownership, a backlog, and a release cadence.

   
• Core assets: ICP brief, discovery guide, ROI calculator, competitive one-pagers, and reference library.
   
• Training rhythm: Weekly call reviews, monthly product deep dives, and quarterly certifications.
   
• Feedback loop: Product and marketing attend win-loss reviews.
  Roadmap reflects field reality.
 

Enablement reduces ramp time and increases attainment more than any discount program you will ever run.

Pricing, packaging, and comp alignment

Comp plans must reflect pricing and packaging.
If you incent ARR but your packaging caps expansion, reps will game discounts to “hit”.
Fix packaging to unlock expansion and align CSM variable to net revenue retention.
For more on monetization strategy, see our blog post: Price-Led Growth: A Practical Guide.

Offer acceptance playbook that wins talent fast

Speed wins offers.
I use a 72-hour offer window with crisp artifacts and a founder touch.

   
• Day 0: Verbal offer alignment.
  Send a one-pager with base, variable, equity, vesting, and the cliff.
   
• Day 1: Founder call to answer mission and roadmap questions.
  Show a live product demo.
   
• Day 2: Formal offer via e-sign with 409A summary and option calculator.
  Introduce manager.
   
• Day 3: Decision.
  If they need more time, ask what specifically they are evaluating and address it.
 

This sequence maximizes trust and minimizes drift.

FAQs

How much equity should I offer an early senior engineer

At seed, 0.25%–0.75% is common depending on impact and scarcity.
Anchor to your equity bands and explain dilution.

What is a healthy sales quota-to-OTE ratio

Mid-market is typically 4–6x OTE.
Enterprise can be 3–4x due to longer cycles.

How big should my option pool be post-seed

10%–15% post-money is standard.
Size for 12–18 months of hiring plus a buffer.

Should I pay remote employees the same as HQ

Pick a philosophy and stick to it.
HQ pay everywhere is simplest, but geo-indexing can stretch runway.

How do I set ramp quotas for new AEs

Use 50% in quarter one, 75% in quarter two, and 100% by quarter three.
Adjust for product complexity.

What metrics signal it is time to slow hiring

CAC payback over 24 months, declining win rates, and rising churn.
Fix funnel physics before adding heads.

How often should I refresh 409A

Every 12 months or after a financing event.
It keeps option pricing clean and compliant.

Do I need RevOps before Series A

Yes if you have more than three reps or a complex funnel.
RevOps pays for itself through clarity and data hygiene.

How do I prevent inequity across teams

Use transparent leveling, tight bands, and a biannual comp review.
Document exceptions with rationale.

What is a good SDR to AE ratio

Start with 1:2 for mid-market and 1:3 for enterprise.
Tune based on conversion rates and cycle length.

Should I pay sales on bookings or cash

Pay on ARR collected to protect cash and margin unless your terms are clean.
If paying on bookings, add clawbacks for churn.

How do I set CSM variable pay

Align to net revenue retention, gross retention, and leading indicators like adoption.
Keep the plan simple and quarterly.

Conclusion

This is the practical blueprint I use to run compensation the David Sacks way.
Start with a stage-aware hiring plan, lock in equity bands by level, and set quotas grounded in capacity and payback.
Build one dashboard, run a consistent review cadence, and resist exceptions.
Do this and you will move faster, hire better, and preserve runway.
When in doubt, remember the core principle of David Sacks compensation advice.
Pay for impact, align with equity, and let the scoreboard decide variable pay.
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