All you need to know via Fred Wilson http://www.avc.com/a_vc/2010/11/employee-equity-how-much.htm...
In short, the first few in terms of percentage, then move to Wilson's multiplier factor model.
Ask HN: Reasonable equity for early employees?
11–20 of 20 posts
Re: Ask HN: Reasonable equity for early employees?
#121% + market salary at an A-round funded company is an extremely good deal for an engineering role.
Is not a solely engineering role. I am leading a team and a product as well (which will most likely be just me for a couple of months). Which is actually what I'd expect from first engineer hires on a startup. But thanks a lot for the perspective.
Re: Ask HN: Reasonable equity for early employees?
#13The numbers you quote look in line with what I would expect, especially if you are getting close to a market rate salary. They are profitable and funded, which is a big milestone. It would help to know - Are they paying you a market salary? What is your past work history like? Does it include startups, and if so, in what role? How great is the rest of the team you are joining? The Mark Suster link mentioned by brudge…
I mentioned I'd be getting a bit higher than market salary. I've worked on my own startup for a few months until my co-founders split, and I was unselected for a seed incubator program as a solo founder (no big surprises here). The rest of team is pretty much being built, but they are seriously taking into consideration Sequoia's tips (which is referred from pg's lib http://ycombinator.com/lib.html): http://www.sequoiacap.com/ideas
Re: Ask HN: Reasonable equity for early employees?
#14The value of the equity is the value when you dispose of it. That is more likely to be zero than $1,000,000. The the information needed to estimate its disposal value includes: the company's plans for future VC rounds, the terms of the 'A' round and prior investments, and the track record of the VC on the board. My opinion is that asking about the finances should not be an issue, since you are being asked to become a…
0.5% is roughly the market price for an otherwise well-compensated engineering role at a company with low financing risk. Factors that increase equity: * Founder incompetence, poor negotiating skill, impatience. * Financing risk (near end-of-runway with no term sheets, &c). * Sometimes, lack of revenue (at shoot-the-moon startups, revenue isn't expected early on and isn't a factor). * Below-market salary. * Non-subst…
>"But when you got funding and sharply reduced financing risk, you got yourself to a place where you don't have to pay the lead tech person a cofounder's equity grant."
I agree that you may not have to and if you don't you can still be successful. On the other hand, if you are making a hire to fill a key position for the long term, it may make a great deal of sense to do so because a person hired at or close to the market rate can by definition find an equivalent position elsewhere.
1% of the company probably won't amount to much once the risk of failure, liquidation preferences and future dilution are considered. Not to mention a potential lack of technical chops among the co-founders.
In my opinion, hiring a key position at or near market rate is an indicator that the company views the hire as filling out the organization chart rather than as finding the person who creates significant value to the company, i.e. another entrepreneur.
I'm not saying it is a bad offer, only that it isn't structured in a way which will satisfy someone with entrepreneurial ambitions.
Re: Ask HN: Reasonable equity for early employees?
#15If they are paying you a salary that changes the equation, to reveal the true equity amount you'd have to convert your salary (times the number of vesting years) into stock at the current valuation. The 'real' number in this case is probably more like 10-20%.
Yes, I took that into consideration. The explicit equation, all from PG's article is:
i = 1 / (1 - n) + sp
where:
i: the amount I'll increase the company's worth divided by the profit multiplier (which is 1 + profit(%)/ 100, eg: 1.5 for a 50% profit)
n: equity received
sp: salary price. Which is anual salary * overhead (pg suggest 1.5) / company's valuation
In short, my values are:
n = 1%
i = 1.023 (2,3% which with a profit of 900% means they'd expect me to increase the company's value by 23%)
sp = a bit above market's salary (can't say much more, sorry)
Re: Ask HN: Reasonable equity for early employees?
#161% + market salary at an A-round funded company is an extremely good deal for an engineering role.
How do you determine "market salary"?
Re: Ask HN: Reasonable equity for early employees?
#17Earlier quoted context omitted.
0.5% is roughly the market price for an otherwise well-compensated engineering role at a company with low financing risk. Factors that increase equity: * Founder incompetence, poor negotiating skill, impatience. * Financing risk (near end-of-runway with no term sheets, &c). * Sometimes, lack of revenue (at shoot-the-moon startups, revenue isn't expected early on and isn't a factor). * Below-market salary. * Non-subst…
> "But when you got funding and sharply reduced financing risk, you got yourself to a place where you don't have to pay the lead tech person a cofounder's equity grant." I agree that you may not have to and if you don't you can still be successful. On the other hand, if you are making a hire to fill a key position for the long term, it may make a great deal of sense to do so because a person hired at or close to the…
Thanks for giving more of a entrepreneur perspective. I agree with you on that it is not a co-founder equity. However, I get the impression that VC would have a heart attack before even considering a better deal.
Considering the deal includes a trigger with very beneficial acceleration mechanism, I don't see them giving in more, on what already seams like an outstanding deal from the VC's perspective (the founders are relying on the VC's expertise on such deals, as they are not that familiar on what is standard and what is not).
Re: Ask HN: Reasonable equity for early employees?
#18I just got a bunch of offers from the valley. Here are some numbers: 3 big named, 10-40 people, post-A companies offered 100K-130K salary, and about 0.15%-0.2% equity. One stealth, seed-funded company in which I would be a funding team member, offers 1%-3% equity with correspondent salary.
so what will you decision be (working for a startup or doing ur own thing)? I remember you did your own stuff (iphone app) and stuff. I m in Sf now and in a similar situation so I d like to hear your take.
I plan to work in a startup first, learn while figuring out my visa situation (I am Canadian), and eventually have my own.
Re: Ask HN: Reasonable equity for early employees?
#19Earlier quoted context omitted.
> "But when you got funding and sharply reduced financing risk, you got yourself to a place where you don't have to pay the lead tech person a cofounder's equity grant." I agree that you may not have to and if you don't you can still be successful. On the other hand, if you are making a hire to fill a key position for the long term, it may make a great deal of sense to do so because a person hired at or close to the…
Thanks for giving more of a entrepreneur perspective. I agree with you on that it is not a co-founder equity. However, I get the impression that VC would have a heart attack before even considering a better deal. Considering the deal includes a trigger with very beneficial acceleration mechanism, I don't see them giving in more, on what already seams like an outstanding deal from the VC's perspective (the founders ar…
Without considering the deal side, an above market salary is attractive from an employee standpoint and if you will be satisfied as an employee the job deserves strong consideration. 1% equity is a nice fringe benefit of the job even if it ultimately pays out very little.
But from a deal standpoint, there really doesn't appear to be one. Acceleration won't trump liquidation preference and it is likely the equity is simply being pulled from the options pool. The slice assigned to filling the position reflects the value placed on the role you are considering. It's not Steve Balmer's 8% as employee #30 and it probably won't cure the entrepreneurial virus if you are infected.
Good luck.
Re: Ask HN: Reasonable equity for early employees?
#201% + market salary at an A-round funded company is an extremely good deal for an engineering role.
How do you determine "market salary"?
http://www.glassdoor.com/ is a start.