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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)

#21

Post by colmvp »

cellis wrote: post #10
colmvp wrote: post #3

Earlier quoted context omitted.

Honestly not that hard, especially if you live in a shared apartment. Plus if you look at his benefits, it looks like they cover some living, food, internet, and gym expenses. I grew up with friends who lived in NYC earning less than 35k a year with no such benefits. Now THAT was tough.

NYC may have been high then, but it isn't near SF now. http://www.wallstreetoasis.com/forums/nyc-cost-of-living-is-...

Even so, she is getting rent subsidy which rounds out to be $1,000 per month ($12,000 for the year).

With that in mind, it's not hard to find a shared apartment for less than $2000 in SF/Oakland/Peninsula. Now if she wants her own 2BR or 1BR, sure she'll have to shell out more.

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

#22

Post by sallen »

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…

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.

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

#23

Post by tptacek »

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.

If you're receiving a W-2 salary that's in the ballpark for your field, absent some other contribution (marketability of your name, unique and non-substitutable skills or rolodex) you're not a cofounder.

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

#24

Post by louhong »

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.

As someone else mentioned there was a $12k housing subsidy. Since she disclosed that she's engaged to the co-founder, and assuming they are living together, and assuming that he's getting a similar subsidy, they would have $2k a month which is doable for a 1 bedroom apartment. She's also got some expenses (food, internet, gym) taken care of so it is very possible.

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

#25

Post by rdl »

Rent subsidy makes no sense to me. It's a fully taxable fringe benefit (at least in the US, if it's not for the benefit of the employer like at a mine), and basically the same as salary, but people don't include it in the salary calculation. It's just stupid for the employer to offer it instead of the same amount of extra income.

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

#26

Post by tptacek »

sallen wrote: post #22
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…

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.

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

#27

Post by colmvp »

nandemo wrote: post #20
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.

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…

Sometimes even more. I know of recent graduate engineers at some of the bigger giants (like Facebook, Google) who get large stock options, signing bonuses, and a six digit salary... right off the bat.

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

#28

Post by tptacek »

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.

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.

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

#29

Post by rdl »

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 is to walk. A competent engineer is more like $150-200k total comp in the bay area, and doing that as $100k + 100k of equity/yr in a real company is pretty plausible.

A more plausible story is offering $50-100k and then equity levels which ramp up rapidly as you go down to $50k. Someone taking $50k vs. $60k should get more than $10k x 4 of extra equity. Maybe something like 100/0.10 90/0.15 80/0.25 70/0.40 60/0.6 50/1. Then, if you need to prioritize candidates, absent other factors, the 50/1 people have a plus mark.

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

#30

Post by tptacek »

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.

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