How I negotiated my startup compensation (with numbers) • Hacker News Board

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

#81

Post by potatolicious » Tue, Aug 21, 2012, 8:36 PM UTC

rdl wrote: post #66

dchichkov wrote: post #51

Earlier quoted context omitted.

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.

If you're already well-off enough to not need income, or have a rich doctor as a spouse, it's quite reasonable to trade salary for equity. Also, I'd love to take $50k/yr + 1% equity in an already successful startup. Say, Facebook.

> "If you're already well-off enough to not need income, or have a rich doctor as a spouse, it's quite reasonable to trade salary for equity."

It is never reasonable to trade your skills at substantially below-market compensation - regardless of if you can afford to do so. I have a lot of savings, but that doesn't make it reasonable for me to start lighting cigars with $20 bills.

Equity is a form of compensation, in this case dchichkov worked it out to be a expected value of $5K (or thereabouts) - how does one justify taking a haircut substantially more than this? (in this case, the haircut is on the order of $50-100K depending on the person).

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

#82

Post by dkador » Tue, Aug 21, 2012, 8:37 PM UTC

taybin wrote: post #37

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.

Her twitter account says she's an engineer. What makes you think her role is Office Manager or QA?

Probably because she's a woman and people here can be very sexist?

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

#83

Post by shasta » Tue, Aug 21, 2012, 8:37 PM UTC

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…

No really, this article was total nutso. "Another thing that made this situation complicated was that Kyle and I are recently engaged" was almost at the half way point. After reading about how she had received an email from "Kyle", one of the Keen founders, to meet for coffee or beer to discuss an offer, I had to assume they were both recently engaged to other people.

I finally realized that, no, in fact they are engaged to each other, but that was after she'd started referring to herself in the third person:

  Michelle: “What should I do? ..."

I hope that someone else wrote this article on her behalf.

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

#84

Post by potatolicious » Tue, Aug 21, 2012, 8:41 PM UTC

joezydeco wrote: post #70

I'd like to hear more about the insanely vague "Health Insurance" on both sides of that spreadsheet. Looks like a complete match and no problem, right? I went from an established company that offered an awesome family PPO plan ($0 monthly premiums, 95/5 coverage, $750 family deductible, paid vision/dental) to a startup that offers a way worse one: ($780 monthly premiums, 90/10 coverage, $3000 family deductible, no vi…

The relevance of health care in this negotiation is contextual. For young, healthy, child-less people, their usage of health care is going to be minimal at best - and really amounts of catastrophic insurance against accidents or major illnesses.

This changes dramatically if the individual has children, chronic illnesses, or other persistent conditions that will require regular use of the medical system.

And also, ouch, $780 monthly premiums - is the company any of your premiums?!

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

#85

Post by wetzler » Tue, Aug 21, 2012, 8:44 PM UTC

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…

Thanks for the thoughtful response! (I wrote the post)

I tried to take the approach you recommended and arrive at some numbers completely independent of the offer. I don't think I made that clear in the post, though.

Calculating the company's worth based on the offer is a cool idea, wish I would have thought of it at the time.

A big Series A is important because we discussed adjusting salaries to market value in the event of a Series A.

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

#86

Post by dorkitude » Tue, Aug 21, 2012, 8:44 PM UTC

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…

To be fair, it's actually like saying 1% equity converts to roughly $20k per year, since salary is annual.

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

#87

Post by rprasad » Tue, Aug 21, 2012, 8:48 PM UTC

dkador wrote: post #78

rprasad wrote: post #57

Earlier quoted context omitted.

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.

You think because they're engaged that she was more likely to get a favorable offer?

Well, yes. Being engaged to the CEO usually has that effect, especially when the CEO himself is handling the negotiations. It would be different if someone else who she was not friends with (and who was not friends with the CEO) was handling the negotiation, but not much. In the end, being the CEO's future wife plays a substantial role in her situation.

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

#88

Post by usea » Tue, Aug 21, 2012, 8:50 PM UTC

lucian303 wrote: post #43

“I think there are some pieces missing from your calculations. What’s the value of the experience you’re going to get from building a company? And you’re underestimating the value of the relationships you’re going to build, and the mentorship you’ll have through our investor network. And if it doesn’t work out, your experience here will make you even more valuable to the Amazons, Facebooks, and Googles of the world.…

Then again, if you're sleeping with the CEO, you actually get that option. You also get the option to create a place full of nepotism that's doomed to fail. Just my experience.

It doesn't seem fair to insinuate that the author's offer was a result of her sleeping with the CEO, or that their relationship will doom the company. What are you basing that on? Honestly it sounds like sour grapes from some experience you've had.

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

#89

Post by endeavor » Tue, Aug 21, 2012, 8:51 PM UTC

Despite strangely subtle mention of the fact that the CEO and author are engaged, I think it's worth noting that has a material impact on a common sense analysis. In the likely event that this start-up fizzles out, it's reassuring that your spouse has a stable corporate job. Sure, engineers are in very high demand RIGHT NOW, but in a few years the bubble could burst and your family could be in trouble. Do you really want to put all your eggs in a single, very risky basket?

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

#90

Post by lancewiggs » Tue, Aug 21, 2012, 8:53 PM UTC

The way this was played out at arms length and in an open style was very smart considering the relationship between the two negotiating parties and the rest of the team. The primary goal should and seemed to be making sure those relationships could sustain, doing so by being fair and reasonable.

The discussion around hedging the risk and cash returns between the fiancées was a good start. I would suggest that the idea of a contract (a series of emails at least) between the 2 would be good to agree and record expectations.

Good fortune