191–200 of 222 posts
Is this in line with expected salaries/equity for a #4-6 employee of a pre-series A startup in SF? What about NYC? For some reason I thought equity would be a bit higher for the first few employees.
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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 chea…
That's roughly analogous to Joel Spolsky's "striped allocation" concept, from his Stack Overflow answer on the same topic.
I wrote a tool a while ago to do this math: http://options-vs-salary.com This is based on various blog entries I've read on the subject.
For example - let's play with the offer given in the article: 1.25% + $85k salary (I'm including all extras in both salaries). Given that the author made ~$142k before, the tool says that if she expects a valuation of $100M on cash out with a 1% stake (after dilution), she should have been offered $117k. That's simply not money you'll get at a 5 person startup under any circumstance, even given the very generous valuation estimate for a startup with $800k funding.
Alternately, if you join as employee #15 or so, you're probably getting closer to .1% of the company, and the calculator says that you should take a $3k deduction off market rates on a $100MM expected valuation. That's also not even close to what really happens.
The problem lies in the comparison to a VC investment. Because for a job seeker, the real comparison is "take a job with standard salary". Your calculator claims that if you could make $600k over four years at a "normal" job and $400k over four years at a startup, you would be upset at a $1MM stock payout because it wasn't 10x the $200k "investment". That is just totally asinine.
In reality, a rational decision would take any salary/equity combo that has an expected value (in the statistical sense) of $1 more than the market rate. There is no multiplier.
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That's about $8/day. I probably spend close to 10x that on food living in Manhattan. Granted I go out a lot and that's including drinks at dinner, but even not going out to eat at all and fasting every other day I have no idea how I'd only spend that much.
I can see it if you go out a lot, but for groceries it's fairly hard for me to spend more than $200/mo. I don't have a car, so just physically carrying $500/mo of groceries to my apartment would be quite an effort! I can't imagine how I'd do that unless I bought mainly stuff with a really high price:weight ratio, like steak or something, which I do occasionally, but don't eat as a staple food. Today, for example, I c…
While the way we eat is certainly an outlier (and I know it), I'm equally as sure that you are too.
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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.
Actually for one person $500/month is pretty generous if you don't go out to eat, fortunately I think we can get really really good data here since Safeway [1] lets you browse their products online. I typed in the zip code for Redwood City where they deliver (94065) that gave me access to their products and prices and then put together a shopping list that would provide 3 meals a day for me for approximately 30 days…
But the spirit of my comment comes from this:
After years of trying, I finally learned how to budget when I was about 25. One of the most important lessons I learned then is that budgets are often a time when people imagine the life they want and try to prescribe it to themselves instead of taking an honest look at the reality of their behavior.
While you included steak and chicken, you didn't include any higher-end proteins (including good steak), nor any luxury items at all really. Nor, of course, any dining. And while it's possible that a person can live to your budget quite happily, it is, I think, more likely that the budget as-is wouldn't be followed. That developer, whose friends easily make in the $120-150k range in SF, are going to want to go to dinner with them. To meet them for lunch. To have a dinner party.
Sure, there are exceptions. But I'm interested in the mean. What do you think?
I wrote a tool a while ago to do this math: http://options-vs-salary.com This is based on various blog entries I've read on the subject.
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Ahh, yikes. Sorry. I should've been clearer. I didn't mean (though it certainly sounded that way) that it's necessary for the reader to know your gender. Looking back, in fact, I realize that I weakened my position by even mentioning it (especially in the vague, imprecise way that I did). I brought up gender because it was confusing (and I, along with other readers here, felt misled) when you – very casually, I might…
Cool. Do you think the intro I added resolves the confusion? "Hi, I’m Michelle. I recently left my job as a technical consulting manager and joined my best friends and my fiancé, Kyle, at Keen.io (I wrote about that here ). This is the story of how I negotiated my compensation."
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.
Shit, that's what I got as a first employee at a company that has <$1m in VC/angel investment. Market-rate engineering salary, too.
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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)…
The rent subsidy is ~$600/month after tax.
It must be very strange negotiating salary with your fiance. 1) Supposing they low-balled you, and you found out. Awkward.. 2) Presumably at some stage, your finances will be joint, or at least interlinked. Does that not mean it is in your fiance's best interest to make sure you get as much as possible? Is that not a conflict with what's best for the company? //edit// Not being mean, btw, I hope they do really well a…
Totally strange. I did most of the negotiation with Dan, our CTO, though Kyle (my fiance) is the person who gave everyone the first verbal offers. I just updated the blog post to make that more clear. I think in the end being friends made the negotiation much easier. I am confident we all wanted what was fair for the business and each individual, and were able to talk at length about that until everyone felt comforta…