When establishing a corporation it is important to plan for employee ownership from the start of the process. The main concern is with the key employees, making sure they are tied into the corporation through ownership, so that their goals will be the same as the investors. Investors generally have no objections when corporations spread ownership down to lower levels in the organization, as long as there is a rational plan for sharing that ownership. Investors' primary concern is the amount of stock and the value they will receive, they also look at equity as a way to encourage the employees' commitment to the success of the organization.
Investors like to see a simple and logical approach to employee ownership.
Stock options are the form of ownership that most investors are familiar with and therefore are the recommended form used in an investment-backed company. In order to create the liquidity required from the investors a significant liquidity event is usually planned within 5 to 7 years from the initial investment. In many cases, the company will issue preferred shares to the investors and common shares to the founders and employees. The preferred shares usually have increased liquidity and dividend rights over the common shares. The use of two classes of stock may allow the company to issue less expensive common shares to employees.