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Ask HN: How much equity should I ask for?

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Re: Ask HN: How much equity should I ask for?

#41

Post by MrTortoise »

28k outside of london is good. If they are getting funding then they are probably also scaling up, you want to get on the leading edge of that if you can. Career wise that might be worth more than equity.

Equity is a double edged sword, sure you get extra value but you are also tied to the company. When things are going great you don't want to leave and when things do sour then you cant because you just lost money and may feel a moral pressure.

28k is also a good figure as it will springboard you into all kinds of other job roles (because recruiters only look at previous salary). my salary jumps were similar in the beginning.

Re: Ask HN: How much equity should I ask for?

#42

Post by auganov »

How many employees do they have? The less the more likely you are to negotiate a good stake. I don't think it really makes sense to apply financial calculations at this stage. You might be underestimating the amount of equity you can get.

What I'd do is keep the table open - make them hire/pay you for a month or two, then negotiate. You can probably get way more if you develop a good relationship.

EDIT:sorry, sounds like you already work there

If they're <=5 people don't be afraid to say 5 or even 10%.

Re: Ask HN: How much equity should I ask for?

#43

Post by jballanc »

tptacek wrote: post #9

Personally, I think negotiating for equity in terms of percentages is a mistake. The better way to do it is in terms of financial outcome. You make X dollars in salary every year. You model the equity as a lump-sum bonus paid after 4 years (divide the liquid value of the options by 4, mentally applying as a deferred bonus for each vesting year). To make that happen, you ask management for some outcome scenarios --- a…

> The other way to do this is just to value equity at $0.

I've worked for startups that gave me stock options, and I've worked for consultancies that have done profit sharing. In every case, I came away with $0. Options can be diluted away and profit sharing is subject to accounting tricks.

The only time I received stock and made money from it was when I worked for a large, established, and very profitable company.

Another thing to consider is that any reward with a vesting schedule will cloud your judgement on when is the right time to jump ship. The advice I was given was that in your 20s you ramp up your income fastest by taking new positions at new companies, and in your 30s the best way to increase your income is to advance within a single company.

I think a good target would be to take a new job every year or two in your 20s, targeting a 15-25% increase in salary each time. However, given that most options have 4-year vesting schedules, that essentially means forgoing stock based compensation until later.

Re: Ask HN: How much equity should I ask for?

#45

Post by tptacek »

jballanc wrote: post #43
tptacek wrote: post #9

Personally, I think negotiating for equity in terms of percentages is a mistake. The better way to do it is in terms of financial outcome. You make X dollars in salary every year. You model the equity as a lump-sum bonus paid after 4 years (divide the liquid value of the options by 4, mentally applying as a deferred bonus for each vesting year). To make that happen, you ask management for some outcome scenarios --- a…

> The other way to do this is just to value equity at $0. I've worked for startups that gave me stock options, and I've worked for consultancies that have done profit sharing. In every case, I came away with $0. Options can be diluted away and profit sharing is subject to accounting tricks. The only time I received stock and made money from it was when I worked for a large, established, and very profitable company. A…

I walked away from what turned out to be a pretty significant pile of money by not purchasing my employee options at the last startup I was an employee of. I don't regret it and would still advise against people putting actual dollars down on private company options, but options ending up worth something are not a myth.

Re: Ask HN: How much equity should I ask for?

#46

Post by 7Figures2Commas »

tptacek wrote: post #38
7Figures2Commas wrote: post #23

Earlier quoted context omitted.

The intention of the process you outlined is good, but the process itself is flawed and highlights the pitfalls of trying to value equity at early-stage startups. First, very few startups can accurately tell you "If we're acquired for $50MM, your options would be worth $Y." Heck, for fun, ask a founder of a typical angel or venture-backed startup how many shares it has outstanding fully-diluted . If tons of startups…

try this: ask for $50 to $100 worth of equity for every $1 of salary offset You take that number from their last valuation?

Of course. In the US you can't get around 409A.

As a prospective employee, if you fundamentally believe that the company's latest 409A valuation is already too rich and equity is important to you, don't join the company.

Re: Ask HN: How much equity should I ask for?

#47

Post by 7Figures2Commas »

mvc wrote: post #33
7Figures2Commas wrote: post #29

Earlier quoted context omitted.

> You will find hiring managers that literally have no idea how or why your options could be worth anything, and it's worth knowing when you're dealing with them. Here's a different perspective for you to consider: most founders or hiring managers at early-stage startups don't have the ability to convince a reasonably skeptical person why the company's equity will ever be worth anything. It's basically a matter of fa…

> But ask yourself what you stand to gain or lose from taking negotiations down a path that will ask your employer to convince you that whatever equity it offers you could be worth something. If you're going to be the head engineer in a startup, shouldn't you be having this conversation anyway as part of your job?

As someone who has held hiring responsibility: there's a difference between asking a prospective employer for the information needed to make an informed career decision and challenging your prospective employer to convince you of its prospects to make you wealthy.

There are a number of perfectly reasonable questions prospective startup employees can and should ask that will give them the information needed to run their own exit scenarios. For instance, "What percentage of the fully-diluted outstanding shares does my option grant represent?" is always a good question to ask.

A prospective employee who demands that the company guesstimate how much he or she might make under random acquisition scenarios occurring at some unknown date in the future will stand out as being inexperienced at best and unreasonable at worst. Furthermore, no hiring manager can ethically meet such a demand.

In this case, the OP is already employed by the company he's negotiating with and it sounds like he's the one asking for equity. To request equity that hasn't been offered and then demand that the company prove it has value is a particularly awkward negotiating stance. Ostensibly he's asking for equity in the first place because he thinks it might have some value.

Re: Ask HN: How much equity should I ask for?

#48

Post by glofishx »

chimeracoder wrote: post #8
glofishx wrote: post #6

Earlier quoted context omitted.

well the worst that can happen is that he does not get hired: no salary increase, no equity. And this is not even the worst that can happen. I have withdrawn (let them expire) offers from people that after receiving my first offer tried to strongarm ridiculous bonuses. The reason I have withdrawn the offer is that it made me clear that the person does not understand their worth to us - hence would likely be a trouble…

> The reason I have withdrawn the offer is that it made me clear that the person does not understand their worth to us - hence would likely be a trouble later on. Or just doesn't have much experience with (salary) negotiation, which, for most roles that aren't sales or HR, isn't necessarily a problem. The people who do this for a living (employers, recruiters, etc.) are always going to know the rules and the social n…

Let me add to all this that we first did an informal negotiation with the prospective employee with a quite lengthy back and forth that led us to put those terms in writing.

But only when he had the official letter did it occur to him to ask for a larger office (it is not possible as he should have seen during the visit, travel funds (???), extra time off and more salary. It was extremely annoying.

Re: Ask HN: How much equity should I ask for?

#49

Post by deanclatworthy »

walshemj wrote: post #24
deanclatworthy wrote: post #21

Earlier quoted context omitted.

It's brilliant you are getting this experience at such a young age. It'll be absolutely invaluable when job hunting in the future. Many CS graduates come out of university in the UK ill-prepared to enter the job market and end up taking underpaid junior roles. But 18k doesn't sound far off the salary I'd expect an inexperienced junior dev to make. Things that might get you a higher salary for this kind of role are a…

18k sounds low for a grad starting that's only 5k less than the minimum wage. Around 26k would be nearer the mark for a starting grad with no experience.

He isn't a graduate though. He is a junior developer who dropped out of university after a year.

Re: Ask HN: How much equity should I ask for?

#50

Post by Catalyst4NaN »

walshemj wrote: post #24
deanclatworthy wrote: post #21

Earlier quoted context omitted.

It's brilliant you are getting this experience at such a young age. It'll be absolutely invaluable when job hunting in the future. Many CS graduates come out of university in the UK ill-prepared to enter the job market and end up taking underpaid junior roles. But 18k doesn't sound far off the salary I'd expect an inexperienced junior dev to make. Things that might get you a higher salary for this kind of role are a…

18k sounds low for a grad starting that's only 5k less than the minimum wage. Around 26k would be nearer the mark for a starting grad with no experience.

Yeah to clarify, I mean that after a year of work I'm now on the same level as a grad?
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