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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)

#51

Post by dchichkov »

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 think that 50k/1% should be considered only as a 'hobby occupation'. Or, if one is trying to change a field of work.

Because this early employee 1% is a) going to get diluted; b) it is over 4 years; c) most likely will result in $0 - $5000 cash-wise. And 50k (without benefits I assume) is.. well nothing.

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

#52

Post by chasing »

tptacek wrote: post #30
chasing wrote: post #12

Wait, what? Firstly: She's engaged to the founder. Secondly: This is on the company blog (which indicates she might not be 100% forthright). (And what am I supposed to learn about Keen.io, here?) Finally (and most importantly): Did she run the numbers about what that 1.25% might realistically be worth? She compared the offer to her current position and (without the equity) there's a ~$55,000 difference. That's a shit…

I'm not sure what this critique has to do with the point of the article. This is, I think, a more careful (and lucrative) negotiation process than 99% of engineers are apt to us. The point of the post was to explain that process, presumably in the hopes of benefiting other startup employees. Do you disagree with the methodology? How? Let's talk about that, and not what you think about the blog author's personal life.

I think she used a valuation of $5mil when doing her calculations. What are the odds the company will exit at that number? What are the odds it'll exit higher? What are the odds that it'll flame out and be worth nothing? Will her shares dilute? How much more does she feel she should earn to make up for all of this extra risk she's assuming?

She doesn't appear to consider any of this. At least, I don't see any numbers that take this stuff into account.

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

#53

Post by tptacek »

chasing wrote: post #52
tptacek wrote: post #30

Earlier quoted context omitted.

I'm not sure what this critique has to do with the point of the article. This is, I think, a more careful (and lucrative) negotiation process than 99% of engineers are apt to us. The point of the post was to explain that process, presumably in the hopes of benefiting other startup employees. Do you disagree with the methodology? How? Let's talk about that, and not what you think about the blog author's personal life.

I think she used a valuation of $5mil when doing her calculations. What are the odds the company will exit at that number? What are the odds it'll exit higher? What are the odds that it'll flame out and be worth nothing? Will her shares dilute? How much more does she feel she should earn to make up for all of this extra risk she's assuming? She doesn't appear to consider any of this. At least, I don't see any numbers…

She's using the note valuation; she didn't just make up $5MM.

Those are all good questions to ask. Some of them are questions she considers, some of them aren't.

Ultimately, though, the question of how you --- a prospective employee --- value equity is orthogonal to the question this post engages with, which is "how do I take the valuation for my role that I arrive at and effectively communicate it to the prospective employer so as to improve my initial offer". And, in that regard, I think this is a very good and useful post.

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

#54

Post by ChuckMcM »

peacemaker wrote: post #45
ChuckMcM wrote: post #19

Earlier quoted context omitted.

Did you miss the rent subsidy part? It was listed at $12K, so $1K/month. But lets step back from that for a moment. $70K gross income. Lets say you put $2K into an IRA (no 401k) so $68K after that. Estimated federal tax is $10,592 [1], Another 6.2% goes to Social security so $4,340 [2], estimated state income tax (CA) is about $3,922 so rolling that up, $68K - $18,854 in taxes thats not quite $50K left over ($49,146)…

Honestly, I missed the rent subsidy part which makes it a bit easier. Still, thanks for the breakdown! I guess I waste a lot of money or something because I somehow manage to spend a lot more here! Although saying that, I prefer to put a lot more away towards savings and retirement and like to travel a lot too.

This.

Frictionless spending is your enemy. Oh that is a great book, click click click, $10 just whooshed out of your wallet into your kindle. There are so many good movies out this summer, blam blam blam another $50 - $60 GONE. Oh god I can't start my day without some caffiene pick up a vente latte half and half for me would you? Another $6 gone. It goes on and on. And it adds up.

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

#55

Post by riazrizvi »

tptacek wrote: post #28
riazrizvi wrote: post #15

Earlier quoted context omitted.

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.

Huh? Nobody offers .5% equity to an "office manager" or "QA". She says in the post her role is "Director". Michelle is an enterprise software consultant with an engineering background.

then, wow, she's getting screwed.

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

#57

Post by rprasad »

tptacek wrote: post #30
chasing wrote: post #12

Wait, what? Firstly: She's engaged to the founder. Secondly: This is on the company blog (which indicates she might not be 100% forthright). (And what am I supposed to learn about Keen.io, here?) Finally (and most importantly): Did she run the numbers about what that 1.25% might realistically be worth? She compared the offer to her current position and (without the equity) there's a ~$55,000 difference. That's a shit…

I'm not sure what this critique has to do with the point of the article. This is, I think, a more careful (and lucrative) negotiation process than 99% of engineers are apt to us. The point of the post was to explain that process, presumably in the hopes of benefiting other startup employees. Do you disagree with the methodology? How? Let's talk about that, and not what you think about the blog author's personal life.

His point is that the methodology is flawed because of the unique circumstances of the author being engaged to the CEO. This skews the inputs upward in her favor.

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

#58

Post by ChuckMcM »

crag wrote: post #44
nandemo wrote: post #20

Earlier quoted context omitted.

OP also mentions $12k worth of rent subsidy. Not bad, I think. I believe there's an implicit "keep up with the Jones" factor here. Surely there are plenty of non-programmers living with less than $70k in San Francisco. In Japanese companies, you need to get to senior level (implying at least team lead but more likely project manager) to earn $70k a year. And it's not like Tokyo is a cheap place to live. I told a Japa…

"rent subsidy"? Are you kidding? Man, I must be living in the wrong town. In Florida, the fact that we offer medical insurance and matching 401k sets us apart from most business here. Though we do have a few other perks.. you cell service is covered by the company. Also everyone gets an ipad (it's yours once you past 6 months). But really though, these "perks" help us (the company) more. But this just proves, bubbles…

"But this just proves, bubbles exist."

No, it just proves that the market for tech talent is stronger in the Bay Area than it is for Florida.

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

#59

Post by ruby_on_rails »

chasing wrote: post #12

Wait, what? Firstly: She's engaged to the founder. Secondly: This is on the company blog (which indicates she might not be 100% forthright). (And what am I supposed to learn about Keen.io, here?) Finally (and most importantly): Did she run the numbers about what that 1.25% might realistically be worth? She compared the offer to her current position and (without the equity) there's a ~$55,000 difference. That's a shit…

On a similar note, I would have preferred if she had posted something like this on a personal blog and not the company blog, because I think it looks tacky (especially when you are sharing your actual salary).

I thought the analysis was generally quite good though and she seems to be quite intelligent. Please don't take my critique to mean that I thought the point she was making was incorrect.

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

#60

Post by encoderer »

ChuckMcM wrote: post #19
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.

Did you miss the rent subsidy part? It was listed at $12K, so $1K/month. But lets step back from that for a moment. $70K gross income. Lets say you put $2K into an IRA (no 401k) so $68K after that. Estimated federal tax is $10,592 [1], Another 6.2% goes to Social security so $4,340 [2], estimated state income tax (CA) is about $3,922 so rolling that up, $68K - $18,854 in taxes thats not quite $50K left over ($49,146)…

While I agree with your sentiment about frugal living, in the spirit of being realitic, $500 a month for food is awfully low.

At 3 meals a day, that's $5 a meal.

No easy feat unless you go for processed, preserved and packaged, which is hardly a good way to live and eat.

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