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How I negotiated my startup compensation (with numbers)

blog.keen.io

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Re: How I negotiated my startup compensation (with numbers)

#31

Post by nutjob123 »

Simucal wrote: post #8
fratis wrote: post #4

A tip for people writing on corporate blogs: let us know who you are up front. Whether there's a byline under the title or a short intro sentence/paragraph preceding the article, knowing who you are gives the reader a way to frame what your story. Because the tech industry is so heterosexual male-dominated, when I read that the author was engaged to the CEO, I first assumed I had misunderstood, then I thought the aut…

That bit of information about them being engaged was just kind of sprinkled into the middle of the article as if it was of no significance.

Yeah, it completely changes the dynamic of the situation. I can't imagine many other people are really going through a salary negotiation with their fiance as the other party.

Re: How I negotiated my startup compensation (with numbers)

#32

Post by tptacek »

rdl wrote: post #29
tptacek wrote: post #18

I think Michelle's methodology here is great, except for the fact that she applied it without a goal number; in other words, she took the offer number and tried to "reconcile" it to the model. The mechanic of running your offer through a model to justify a counteroffer is a great one that more nerds should adopt, but she's missing an input: what does she want the model to say? Your goal as a prospective employee is t…

It's pretty common to subsidize employee equity because employees having equity are incented to work, and because common generally is discounted to preferred by a larger factor very early in the formation of the company. It's reasonable to simultaneously treat employee equity as $2mm valuation and investor equity at $5mm valuation, especially with a note. In this case, though, I think the way to win the negotiation i…

I'll admit: my issue here comes down to hating sliding equity/salary scales like this one. The rough amount of skin you want a team member to have in the game should be a part of the role definition, not a detail of the comp plan.

There have to be better ways to account for sub-market salary than a salary/equity scale multiple percentage points long. Ick.

Re: How I negotiated my startup compensation (with numbers)

#33

Post by ricardobeat »

tptacek wrote: post #26
sallen wrote: post #22

Earlier quoted context omitted.

I thought she mentioned it was a 4 year vesting for that equity, which means 1% = $80k. But then that values the company at $8M, which also doesn't match the asserted $5M.

I'm not following how you're drawing a 4x valuation from vesting, but I'll admit that my head is in an SSL3 negotiation bug I'm grappling with while posting, so maybe I'm crazy.

$20k/year over 4 years = $80k

Re: How I negotiated my startup compensation (with numbers)

#34

Post by sallen »

tptacek wrote: post #26
sallen wrote: post #22

Earlier quoted context omitted.

I thought she mentioned it was a 4 year vesting for that equity, which means 1% = $80k. But then that values the company at $8M, which also doesn't match the asserted $5M.

I'm not following how you're drawing a 4x valuation from vesting, but I'll admit that my head is in an SSL3 negotiation bug I'm grappling with while posting, so maybe I'm crazy.

She'd only get 1/4th of that equity per year, and the salary is given in a yearly amount.

Re: How I negotiated my startup compensation (with numbers)

#35

Post by tptacek »

sallen wrote: post #34
tptacek wrote: post #26

Earlier quoted context omitted.

I'm not following how you're drawing a 4x valuation from vesting, but I'll admit that my head is in an SSL3 negotiation bug I'm grappling with while posting, so maybe I'm crazy.

She'd only get 1/4th of that equity per year, and the salary is given in a yearly amount.

Oh, right. Of course. See, I was crazy.

Thanks!

Re: How I negotiated my startup compensation (with numbers)

#36

Post by rdl »

tptacek wrote: post #32
rdl wrote: post #29

Earlier quoted context omitted.

It's pretty common to subsidize employee equity because employees having equity are incented to work, and because common generally is discounted to preferred by a larger factor very early in the formation of the company. It's reasonable to simultaneously treat employee equity as $2mm valuation and investor equity at $5mm valuation, especially with a note. In this case, though, I think the way to win the negotiation i…

I'll admit: my issue here comes down to hating sliding equity/salary scales like this one. The rough amount of skin you want a team member to have in the game should be a part of the role definition, not a detail of the comp plan. There have to be better ways to account for sub-market salary than a salary/equity scale multiple percentage points long . Ick.

I'd probably have a range for the req (based on budget), and make an offer with two points (specific to the employee). The market is weird enough now that if you wanted to hire an SSL protocol expert, you might end up hiring someone with 2-3 years of general security and dev experience who has read the book, or someone who is EAY, and even the first option might be better than no one in many roles.

I've heard Palantir does three offers, and taking the top cash one is a bad signal.

Also, I think employees undervalue equity, and there's a weird signaling/etc. effect where shitty companies give out equity freely, good companies don't. Cash is cash, though.

Re: How I negotiated my startup compensation (with numbers)

#37

Post by taybin »

riazrizvi wrote: post #15
sync wrote: post #5

Does 1.25% seem ridiculously low to anyone else? It seems to me like she should have negotiated to be a co-founder instead of employee #1.

It feels like her role is an auxiliary function, like Office Manager or QA, so I think her generic analysis works. If her role was central to the business, then I don't think she would be valuing her contribution with a one-liner like 'Employee’s value-add to the company (I used 15%, which I think is pretty low!)'. Instead the question of her value-add would be the starting/central point of the negotiation.

Her twitter account says she's an engineer. What makes you think her role is Office Manager or QA?

Re: How I negotiated my startup compensation (with numbers)

#38

Post by tptacek »

rdl wrote: post #36
tptacek wrote: post #32

Earlier quoted context omitted.

I'll admit: my issue here comes down to hating sliding equity/salary scales like this one. The rough amount of skin you want a team member to have in the game should be a part of the role definition, not a detail of the comp plan. There have to be better ways to account for sub-market salary than a salary/equity scale multiple percentage points long . Ick.

I'd probably have a range for the req (based on budget), and make an offer with two points (specific to the employee). The market is weird enough now that if you wanted to hire an SSL protocol expert, you might end up hiring someone with 2-3 years of general security and dev experience who has read the book, or someone who is EAY, and even the first option might be better than no one in many roles. I've heard Palanti…

I strongly agree with the last part of your comment; I think that nails my uneasiness about this particular offer.

Re: How I negotiated my startup compensation (with numbers)

#39

Post by mjn »

peacemaker wrote: post #2

Interesting post, though $70k to live in San Francisco? That's going to be pretty tough, honestly it's crazy expensive here.

That's almost exactly the median household income for the city, so it's pretty normal to live in SF on that salary. Mostly among people not in tech or finance, though, so may depend on one's social circles (it's easier to live more cheaply if your friends aren't making six figures).

Re: How I negotiated my startup compensation (with numbers)

#40

Post by ricardobeat »

rdl wrote: post #29
tptacek wrote: post #18

I think Michelle's methodology here is great, except for the fact that she applied it without a goal number; in other words, she took the offer number and tried to "reconcile" it to the model. The mechanic of running your offer through a model to justify a counteroffer is a great one that more nerds should adopt, but she's missing an input: what does she want the model to say? Your goal as a prospective employee is t…

It's pretty common to subsidize employee equity because employees having equity are incented to work, and because common generally is discounted to preferred by a larger factor very early in the formation of the company. It's reasonable to simultaneously treat employee equity as $2mm valuation and investor equity at $5mm valuation, especially with a note. In this case, though, I think the way to win the negotiation i…

Higher equity is always the most rewarding option in the best possible outcome. But it's hard to leave safe money on the table. Four years from now the company could be worth way more than the current $5mm, then those $20k/year would look like scraps.

I agree with tptacek; 100/0.1 and 50/1 suit very different persons, the company should decide which type it's going after and limit that range.

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