How I negotiated my startup compensation (with numbers)

I know of no employees who took the mostly-cash offer, but that may be a selection bias on my part; I've never worked for Palantir, and am just friends/hang out with people who particularly care about their job (independent of where they work), don't have children or other major cash obligations, and are libertarian tax-minimizers. Those people are highly likely to shoot for highest EV (vs. low risk) and pushing as much income to capital gains as possible.

Also depends on which company, and who you are. There are companies that go into accelerators after raising money, with great traction, etc. If you're just out of school or bigco and NOT a potential founder right now, doing 50/1 for 2 years to build great experience might be worthwhile, although pushing for higher cash comp once the company raises >$1mm or so might be reasonable.

From what I've seen of YC W12 and S12 companies, there are >10 where I would have done $50-70k + 1% to work there for 2-4y, back when I was 25, and absolutely after leaving school.

Fair enough, as long as you're going into this with open eyes. It's not like most risks that startups take; inherently, most people wildly underestimate the risk that a personal relationship will go sour down the road. (If we didn't, a lot fewer people would get married.) I'm pretty sure if you ask most folks getting married what they estimate their chance of staying together is, they'll pick a number higher than ~50%.

Even if she's reporting directly to the CEO now, that raises its own questions, in particular for other employees. If I'm at her same level, do I feel like I'm going to get a fair shake if she and I are gunning for the same promotion? Down the road, as the organization grows, is she forever tied to reporting to the CEO? How do you ensure there's never a quid pro quo exchange that opens you to a lawsuit?

It's those kinds of questions that scare most organizations away from having direct reports romantically involved. It's especially fraught in a relatively unstructured organization like a startup where things like promotions and org changes can be fairly sudden and subjective.

Luckily, HN comment sections are not the alpha and the omega.

A lot of people merely clicked the "up" arrow and refrained from comment, and so far about 3000 of the post's readers have clicked through to our main site ;)

In a company which is post accelerator and has raised $1-2mm, without being an absurd success or abject failure, I value equity for employees using a valuation of 0.5-0.75x the cap on convertible debt if you were to issue the debt right now. I have no idea how to handle this at Series A or beyond; a bridge I will burn when I come to it. You may adjust this based on whether you view investor money as particularly cheap (which varies by segment), how long since you raised, etc. The main thing is it should be consistent across employees at a given time.

(So, e.g., a $10mm cap note company which has raised $2mm would treat each 1% of employee equity as $50-$75k. So giving up $25k in cash salary should get you, as a 4 year grant, 2% to 1.3% equity. That is in line with the 0.5-1% for a seed stage 5-7y experience strong individual contributor equity, which is a slightly low amount; generally I've seen 0.1-0.25% for 3-5y experience Series A hires, on say a $20-30mm valuation, which also is in line with this.)

The annoying thing is a company wants to discount equity to employees at 0.5-0.75x. Engineers often discount it to 0.1, especially people who have been burned in the past (90% of people in the first bubble, ex-Zynga people, etc. If you're negotiating with someone who irrationally discounts equity, just pay him more cash and pocket the difference).

A Google SSE or Staff Eng is about $200-225k on the market (total comp), a 3-5 year guy is more like 125-150k, and a very junior person is 75-100k. You can allocate that among perks, equity, bonus, %, and base in various ways.

There is basically no way to use just above-market salary to hire good people, but lack of market salary can get people to rule you out. I've worked at companies where ~everyone got $150k cash + strong equity (0.25-1%), and it ended up just being mercenary people who worked there and remained, due to other defects in corporate culture. (I've also worked in a 200-500k cash-comp-only environment, and the quality of people was inferior to any startup I've ever seen.)

You can probably get people to sacrifice 0-25% of total comp (and maybe up to 50% for short periods of time, like 3-6mo until financing). They are only willing to do that if they think it is "fair", which means they have good odds of doing well on the deal, and others in the company, particularly founders, make similar sacrifices. If a founder is paying himself $150k/yr, and is trying to negotiate a $225k Staff Engineer hire to take $50k cash + $50k equity, you'll probably only get the most self-sacrificing and useless person to join. If a founder is paying himself $30k and is trying to get a $225k SE to take $70k/yr until Series A (6mo), then $120k, plus $50k of equity, and some other perks ("not being at Google of 2012" seems like a serious perk for a lot of the people I've talked to), you'd have a shot.

The best way to allocate equity that I've seen was the 'allocate by cohort' strategy (I forget who proposed this...maybe hn user joshu? or suster or feld or someone). Basically all of your hires at seed stage get x%. All of your hires from Series A to Series B get x% also. But your first pool is split across 5 people, and your second pool is split across 25 people. It is way easier for me to understand the relative importance of the 5 people hired during seed stage vs. figuring out their time/risk weighted importance in a company all the way to IPO.