- pre-series-A
- significant traction already with customers you'd recognize
- likely to raise good series-A round
- about 8 engineers, 18 to 20 employees in all
- me -- 20+ years significant SW dev experience
- me -- would work remotely most of time
- offer: $130K range, 0.2% equity (seems low-ball to me, or inexperience on part of founders ... or lack of respect for the position or me)
I know it's not all about the money, but in this conversation we are only talking about money.
rgbrgb's point is also well taken. You should be able to swap equity for salary, since for a pre Series A company that's a chunk of coin.
$130k is a lot of money and, like you said, being in the first few employees is a great opportunity for personal development. I just feel like you have to consider the 0.2% to be a lottery ticket because most of the time it will end up being worth nothing or very little.
A venture-backed startup is typically looking at a $1B valuation goal, with $300-$600M being "successful," and $100M is, at best, a consolation prize. From the perspective of outsiders, it's tempting to only consider orders of magnitude, but note that the difference between a $80M acquisition and a $150M acquisition -- which if you're just reading about it in the press are probably both compressed to "around $100M," is an almost 2x payout difference for investors.
0.2% isn't almost nothing. $200k from a consolation prize is not almost nothing. $600k-$1M from a basically successful but non-unicorn monetization is definitely not nothing!
0.2% in a pre-series-A company is also just the very start of a long conversation, not the end of it. You are of course correct that there is likely to be dilution. There are also going to be more stock grants long before any monetization event. If you stick out a job that starts with a 0.2% grant for long enough for that grant to fully vest, much less for long enough for it to monetize, it would not be, in my experience, unlikely to have another 0.2% (of the original size share-pool) coming.
My experience is also that if there is a lot of dilution, the company will at least mitigate that dilution for employees with new grants. Maybe not totally counteract it, and maybe not mitigate it at all if the dilution is, like 20%, but if your grants are halved by dilution, I would expect the company to bring you back up to 80%+.
I think that a lot of people fixate on the initial grant. That makes sense if you're a founder or, like, a really really early employee who took basically no salary and instead got 1%+. Maybe those people never see significantly more stock after their initial grant. My experience from having taken a few offers in the 0.1-0.5% range is that you will see materially more stock in new grants as time goes on. Of course, that's only a few companies, and maybe I've just dealt with unusually reasonable companies.
'and instead got 1%+.' -- this is a description of somebody who had decided to work for free for some reason.
This current company has a highly dysfunctional development culture, no automated testing, poor choice of deployment vehicle, a VP high on the DK spectrum. I can't bear it.
The place has a very high likelihood of acquisition in the next 2 years. It's a question of how long product dev can go on before the product implodes vs how quickly the shiny CEO can attract a good buyer for the polished turd. I lose a bit of my soul every day.
2 years is not really a long time to live in suck-it-up mode, although your perspective will depend on which side of 30 you're on.
The current company is legacy-land as far as development tools goes (though they're reliable and in the right hands do very well). The prospective startup would involve new tools I need to "keep up-to-date".
I did a short (paid) project for them involving some popular scripting significantly-hipper-than-Perl language and delivered it in serviceable, idiomatic form that I know they were very happy with, using all the right libraries. I picked it up the tool/language quickly enough. I feel I need that experience and exposure to maintain my longevity in the SW market. Sticking with the current company is 2 more years I become more of a dinosaur.
Exercising options generally gives you shares in the company, not a payout. A payout would require selling the shares. Normally you can exercise vested options at any time very easily. Selling those shares you received from the exercise for cash is not as easy.
You could probably trade some salary for equity. It's all about your personal situation and how much cash you need. For me, 130k would be a bit overkill and at this point I'd try to trade 30k for an extra half point or so (I'm betting they'd cap the equity at .5% total or something though).
That said, if they're hiring a 20th employee at 130k and you're confident that there's enough money in the bank + revenue that doing so makes sense (that's something to check), then the risk factor is a lot lower than a 4 person startup burning through seed capital who will offer you the 1-2% you're after. There are a lot of those in SF that you can join. You probably won't have a nice office or free meals but you'll make a bigger dent at a smaller scale and therefore get a bigger piece of a smaller pie.
In short, from the info you gave, I don't think they're necessarily low-balling you. But if you do, don't join. If you're good, there are at least 50 other companies in the bay who will give you an offer like that tomorrow.
Note, when you are investing money into company you are not getting any ridiculous vesting cliffs, you are getting a multiplier as a valuation cap and usually your invest in convertible debt, not stocks.
(as a side note, if you are a professional who can contribute from the first day at work with virtually zero effort spent on you to get you up to speed, you really should try to negotiate for monthly vesting with no cliff for all your equity.)
As you point out, the deal structure is very different from a deal that would be made with an investor. I'm guessing the company wouldn't take a 30k check from an investor right now or agree to take 5 * 30k from a single investor allocated monthly over the next 5 years. Also, him having more equity will probably make him a more valuable/devoted employee so that needs to be factored in.
after 5 years, you net even. Anything longer than that you lose out. Anything shorter, you make more (sans taxes.)
Seems like a risky bet to me.
- Does the company (and it's investors/accelerators) have some sort of prestige that many people outside of the company would recognize? (i.e. if you put it on your resume will it look good later)
- Ignore equity at this point (as the chances of it really paying off massive dividends are unrealistically low). Is $130k range in line with what you expect to earn?
(note - $130k is comfortably livable in pretty much anywhere in the SF Bay area)
That depends on a ton of things.
Are you excited to join the company? Do you believe in their vision? Do you find excitement in the problems that they are helping their customer's solve? Do you feel good cohesion with the founders and the engineering team?
Answering those questions are far more valuable in deciding to join a startup vs compensation. The compensation piece, if you feel is low, research and negotiate for it. If you can't find a common ground on compensation that would make you happy to work there, then don't join them.
$130k is not lowball. 0.2% is not lowball. Both are on the mid-to-low side of appropriate if we take you at your word for skill and fit.
More than that, respect has nothing to do with it. Just rm -rf that whole train of thought from your head. Compensation negotiations are negotiations, which means this is a conversation. Conversations go two ways. If you're not happy with the offer, counter.
> This current company has a highly dysfunctional development culture, no automated testing, poor choice of deployment vehicle, a VP high on the DK spectrum.
That sounds EXACTLY like Silicon Valley Generic BigCo to me.
That salary is also low for SF based on what I've seen too.
What do you want outside of financial incentive? Is it something you're excited about?
What's your background? A lot of us are hiring.
Bonus structures are great for cash generating businesses, but have limited upside for startups that have the potential to grow 100X to 1000X.
Sam Altman estimated that employees 10 through 30 combined should get at least 5% of the equity, That implies an average of 0.25%, which is fairly close to 0.2%.
http://blog.samaltman.com/employee-equity
If you want to work for the company, equity is important to you, and you think the offer is below was your contribution to the company will be, then negotiate for the right amount of equity.
EDIT: Actually, let me expand.
1. That does seem like lower-than-expected equity for a senior employee at a small start-up that's pre-series-A.
2. But on some level, I don't think that should be the controlling factor. I'm assuming here that this is a pretty run-of-the-mill seemingly doing-well pre-series-A startup. That is, it'll be at least five years, and probably more like ten, before it monetizes, and the chance of it monetizing is sub-10%. And your options would vest over the course of 4 years with a 1 year cliff.
3. So that said, if you're going to be there 4 years, and the company is going to do well enough over those 4 years for us to care what your equity is, then I would assume that 4 years from now, you'll be a critical member of the leadership team. The company will have had to grow a lot, you're senior already, so... right? There's plenty of chance to, in that case, have your equity position "right-size" with the company. To, in other words, re-grant stock based on whatever inflation happens and based on how you work out as a member of the inner team of the company.
4. And given how far off any equity payout is, and how uncertain it is, I'd think that your decision to go with the company should be based on salary, what you expect the salary to do in the next year or two, and whether you believe that you can become a member of the leadership team of the company and whether you would enjoy all of that.
5. If, on the other hand, this company has some kind of special sauce that means that equity payout is more likely or more near-term, then, well, maybe that justifies the lower equity award.
Maybe I'm jaded, but I'm not sure I would ever again consider the equity portion of a job offer unless it's a stock option at a publicly traded company.
That aside, you earn equity with risk, so my question to you would be: "What are you risking?" Certainly there's an opportunity cost (you're risking not working somewhere else). If you think your work-remotely-market-rate for a non-startup (i.e. no stock) is X, then you are risking X - 130k per year for 0.2%/4 (vesting over four years). So if X is $150k, you're buying those shares for $80k (4 years of salary difference). Is that a good bet in your eyes? It'd only be a good bet in mine if I had fairly heroic belief in the startups shot at "unicorn" status or if I was really excited about the work/team.
However, if you think $130k is a reasonable salary for remote work and the contribution you'll be making (it could well be), then the stock is a high-risk bonus.
Regardless, you should certainly negotiate for more salary OR equity (whichever you care about more) every time.
Honestly, a healthy company that really believes in a strong exit in the future should be willing to match your previous salary. You should ask for $150k and skip the equity. If you work there for 5 years, an extra $20k/year is worth more than 0.2% in a $50M exit.
0.2% sounds a bit low.
IMO it's not a bad starting point for a negotiation. If you're expecting something significantly higher, it might makes sense to look at later stage companies (or a company like Google or Facebook if you want to maximize your earning potential)
I wouldn't take the low equity offer personally, at 8 engineers, you're not their first hire, and the position is more or less "need another engineer" at this point. On the other hand, it does mean that hiring you in particular is not the priority.
It's ok to be ok with that and its implications for the way your role will be perceived in the workplace over the short term. It's ok not to be ok with that. Working remotely may or may not be worth it.
In the end, I suspect that top pay and wow! equity aren't going to attach themselves to many advertised remote positions. It's when remote work is how a company gets the specific individual they want that those are more likely.
Good luck.
As far as actual numbers go, that's entirely dependent on what you think you're worth, and what you think that equity is worth. You're the 21st employee, and they are raising money, so it isn't exactly a red flag to me. Treat the equity as a bonus that may never come to fruition.
Since your equity has a relatively small chance of being worth anything anyway, 'significant traction' or not, I'd focus on the things that'll definitely be a factor in your life - things like the work, the people, your salary, and so on.
Negotiate for more equity and weigh
- the final offer vs. what you think you could get in the rest of the market
- how much happier you'd be at the new gig vs. waiting around for another gig
I know nothing of how much equity is 'fair' for early hires but ultimately it's about where you'll be happiest, money / equity aside. Do what makes you happy and you won't have regrets.
But other commenters are right: pay attention to the salary, the benefits and the position itself. The equity is a lottery ticket. I do believe they should correct the amount to make you feel valued, but that's the only reason.
Corporations assert their power all the time. There is nothing wrong with you asserting your worth. Good luck!
I'd look at salaries for your skillset and location on GlassDoor, compare that to the $130K, and make your decision based on that.
In any case, I'd go back to them with a counteroffer. If you want more equity, I'd ask for 2% and hope for something like 1.2%. But unless you're very confident in the direction of the company, I'd choose salary over equity any day.
