

What should I ask for when negotiating a CTO position in a funded start up? - fbliss

A new start up that is receiving funding has offered me the opportunity to take on a role as the CTO.  The opportunity could be the largest for me, as the players are well established in the industry they are selling to.  What kinds of things should I cover in making the opportunity a good one in terms of compensation?
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brianl
(1) How easy will it be for the startup to find your replacement? If they can
they list a position on Craigslist and get a bunch of qualified candidates at
$80/hr, that will likely be the compensation.

(2) What is your opportunity cost? If you can get easily get a contract
developer job for $125/hr, that is what you "should" be paid.

In the example scenario, a smart startup will try to get somebody with $125/hr
talent at $80/hr. The cheapest way to bridge this is by stroking your ego and
offering you BS title like "CTO". WTF is a contractor CTO? They will probably
not let you attend "real" executive team meetings and vote on important
decisions.

My suggestion: (1) Let them know that your time is wort $125/hr. and you'd
take $50/hr in stock (and CTO title). It becomes a good deal for both of you.
(2) Work smart and work hard. Make them offer you a great compensation package
to be the permanent CTO.

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briggsbio
Frankly, you shouldn't wait for the equity portion because of the cliff. You
won't vest any shares in the first year, so if it is for a "contract" CTO
position initially, why the trepidation from them for the stock right away?

They will pay more for you without stock, and they won't lose any stock if
they don't keep you longer than 1 year, so they shouldn't be reluctant to
issue options to you. If they are, they sound as if they are gun-shy in
issuing their option pool, which is suspect. Not only for you, but for other
future employees as well.

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fbliss
Thank you, I should note that these are preliminary talks and there are some
missing bits of info on my end - they have approached me to do this, but we
haven't talked details yet, so a follow up with probably come out of the
discussion we have in a couple weeks.

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bdwalter
Forward vesting... you want it. When/if they sell the company you do not want
a bunch of unvested stock options disappearing. Has happened to several folks
I know, and myself in the past. Forward vesting causes all of your options to
vest in the event of a change of control, or sale of the company.

~~~
djb_hackernews
Good point, but I still think he should figure out how much equity he is going
to get. Right now from his commments he is getting zero equity with the
possibility of a small percentage sometime in the future. Hardly worth giving
up anything else during negotiations.

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fbliss
I'll come back with details and probably a follow-up question in a couple
weeks after our discussion about the long-term opportunity. I haven't had any
offer yet, only an invitation to consider joining them since they have secured
funding.

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nolite
You're going to be vested over a long period of time, possibly with a cliff..
so don't forget that in your negotiations. Beyond that, ask for what you
deserve

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fbliss
I don't fully understand the cliff concept, if you could enlighten me? Thanks!

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heliodor
In that case, I highly recommend you take hours and hours and hours and read
and learn everything you can find about startup options, payouts, and
historical stories of how people got screwed!

Don't walk in there unprepared.

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fbliss
Well, that's why I asked the question in the first place, here, and I haven't
been disappointed with the excellent advice and points from others.

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jph
To learn about the CTO stock options, vesting, and employee pool of options,
this is the best book I've read on the subject: Venture Deals: Be Smarter Than
Your Lawyer and Venture Capitalist by Brad Feld and Jason Mendelson.

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mattacurtis
This is definitely a great book. But be aware that every lawyer and VC worth
their salt has read this as well.

~~~
fbliss
Great, then I'll get it! Thanks!

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djb_hackernews
Have everyone agree to a definition of your role in the company. Are you a
cofounder acting as CTO with cofounder equity, or are you an executive
employee?

Once that question is answered the rest is pretty straight forward.

~~~
fbliss
The position begins with contract CTO work and then a discussion about equity.

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malvosenior
So it's basically a high end contract with a chance to go full-time?

If that's the case, I'd go $20k-$30k /month as a good starting rate for an
executive level technical contractor.

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damoncali
Are people really making that in this situation? Sounds awfully expensive in
my experience.

EDIT: I get that people can rationalize that amount, but are people you know
of actually _getting_ it. I, for one, would have a very, very hard time paying
someone $60k in cash for two months of early stage "CTO" work (and a very,
very easy time taking it). But I'm more interested in the facts: are people
actually paying short term contrators at early stage startups $20k-30k/month?

~~~
gyardley
Contractor implies that you're getting no benefits and you're paying up the
self-employment tax instead of the company.

For a CTO-level position, at a startup that's raised a Series A? You bet I'd
want that much money. Assuming a typical start-up level workload, that works
out to somewhere around $80 and $120 an hour, which is pretty reasonable for
CTO-level talent, considering the higher tax burden and the need to secure
your own health insurance.

EDIT: Yes, certain (funded and/or profitable) startups will pay this much (or
the equivalent in salary and benefits) for a talented CTO. Note that this
implies actual CTO-level work and not "oh, I'm just going to call my first
developer hire the CTO to flatter his ego because he's the only technical guy
on staff." (That sort of title inflation you should run from - it's just going
to cause HR trouble when the company grows and needs a _real_ CTO, and it's
usually offered in lieu of an appropriate salary.) If you're putting "CTO" in
quotes, you need to hire a developer, not a CTO.

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mathattack
Don't just think of compensation in terms of dollars and equity today.

Also consider: \- What are the benefits implications? \- How much will this
increase your future marketability through connections and learning? \- How
will this impact your ability to do things outside of work? (10 hour workday?
12? 16?) \- What will the work environment do to your mental health?

As items with current and future $ implications, this is part of the
compensation discussion.

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tzm
I can share details from a previous startup: Co-founder position. CTO title.
Board seat. $120k, 5% equity up front, 5% vested over 2 years. VC backed.

