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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)

#91

Post by dchichkov »

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 are already well-off, then 50k/yr wouldn't make any difference for you. And you probably have connections and can bring in a lot of value. So, if you are serious enough about it, ask no salary and a late co-founder status. Would serve you a lot better. And wouldn't allow other founders tell you, that they are paying you "salary".

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

#92

Post by ajross »

dorkitude wrote: post #86
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.

But one year is about the horizon time most of these startups are looking at. At that point either they'll get real funding and the salaries will get rescaled to market values or they'll fail. Either way they're looking at saving about $20k total in the immediate term.

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

#93

Post by dkador »

rprasad wrote: post #87
dkador wrote: post #78

Earlier quoted context omitted.

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.

I think that's a fair thing to assume. Full disclosure: I'm Dan, one of the other co-founders of Keen. I actually did the negotiation with Michelle - Kyle delivered our original offer. But she's one of my best friends as well. As is Kyle. As is our other co-founder and the two other people on our team.

The negotiation was awkward, but I'm personally convinced that we're a stronger team because of our close personal bonds. It's not for everybody or every team, of course, but I believe it works for us.

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

#94

Post by joezydeco »

potatolicious wrote: post #84
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, ouc…

Yeah, they're fronting the other $1400 of the premium. We're a very small company and getting completely dicked by Blue Cross / Blue Shield. Doesn't help that most of the principals are senior people with families. I also chose the PPO over the HMO and FSA plans. I've btdt with those two and will never go back.

Which brings me back to your first point. Yes, the healthcare aspect (especially in the US) is contextual. Which means startups can favor younger/inexperienced/childless early employees over older experienced/family people.

And remember, anyone's situation can change on a dime. Doesn't matter where or when you work.

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

#95

Post by smackfu »

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?

Surely it messes with things that a favorable offer to her is also a favorable offer to her husband.

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

#96

Post by gadders »

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 and make millions. It just seems a bit.. strange.

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

#97

Post by rdl »

dkador wrote: post #76
tptacek wrote: post #38

Earlier quoted context omitted.

I strongly agree with the last part of your comment; I think that nails my uneasiness about this particular offer.

You think that if a company offers a sizable equity percentage as part of their comp it signals something negative about that company?

Yes, if the founders of a company, who have the best visibility into the company, don't value their equity, it's a waving red flag on fire. Either they are idiots (inexperienced at best, incompetent more likely), or company = doomed.

Obviously offering tptacek 5% in a company isn't bad, but offering an office admin 5% is.

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

#99

Post by rdl »

rm999 wrote: post #77
rdl wrote: post #25

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.

Agreed. My theory is that people irrationally value free stuff. I spend about 3,000 dollars a year on work-time food (250 work days * 12 dollars for lunch/an afternoon snack). The way people talk about free food at some tech companies you'd think it's worth way more than a few percent of a typical developer's post-tax income.

Food onsite is a special case. It's tax-advantaged for the employer (if offering meals onsite is "for the convenience of the employer, and for a business purpose"), and food has a high search/storage/etc. cost. Similarly, I'd value a 30" monitor at about $1k/yr salary.

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

#100

Post by osxwm »

richcollins wrote: post #67

Another idea: Contract for $200 an hour for 6 months and make $200,000. Invest that into the company, get 5 - 10%, and join as an employee to influence the outcome of your investment. Even better idea: Do the same but invest it into your own company. Keep 99% and convince someone else to take 1% + pocket change to work for you for a few years.

Go read about investor qualification and why taking on an unqualified investor at an early stage can hurt your company.
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