
Ask HN: Should I join startup for less-than-expected equity? - cuca_de_chumbo
 - startup is SF-based company<p>- pre-series-A<p>- significant traction already with customers you&#x27;d recognize<p>- likely to raise good series-A round<p>- about 8 engineers, 18 to 20 employees in all<p>- me -- 20+ years significant SW dev experience<p>- me -- would work remotely most of time<p>- offer:  $130K range, 0.2% equity (seems low-ball to me, or inexperience on part of founders ... or lack of respect for the position or me)
======
rgbrgb
First off, it's probably not lack of respect. If you really think that and you
can't get it out of your head, then don't join the company. To me, that seems
like a market salary. For better or worse, experience doesn't count for that
much in the market for software engineers.

You could probably trade some salary for equity. It's all about your personal
situation and how much cash you need. For me, 130k would be a bit overkill and
at this point I'd try to trade 30k for an extra half point or so (I'm betting
they'd cap the equity at .5% total or something though).

That said, if they're hiring a 20th employee at 130k and you're confident that
there's enough money in the bank + revenue that doing so makes sense (that's
something to check), then the risk factor is a lot lower than a 4 person
startup burning through seed capital who will offer you the 1-2% you're after.
There are a lot of those in SF that you can join. You probably won't have a
nice office or free meals but you'll make a bigger dent at a smaller scale and
therefore get a bigger piece of a smaller pie.

In short, from the info you gave, I don't think they're necessarily low-
balling you. But if you do, don't join. If you're good, there are at least 50
other companies in the bay who will give you an offer like that tomorrow.

~~~
dchichkov
A 30k of 'salary per year' trade for equity should really get the same deal as
the investors get. Assume that you _take_ that salary and then invest 30k into
the company.

Note, when you are investing money into company you are not getting any
ridiculous vesting cliffs, you are getting a multiplier as a valuation cap and
usually your invest in convertible debt, not stocks.

(as a side note, if you are a professional who can contribute from the first
day at work with virtually zero effort spent on you to get you up to speed,
you really should try to negotiate for monthly vesting with no cliff for _all_
your equity.)

~~~
rgbrgb
Sure, in theory I agree with you but I don't think it's possible to calculate
like that. We're talking about trading somebody's time and creativity for
salary and equity paid out monthly.

As you point out, the deal structure is very different from a deal that would
be made with an investor. I'm guessing the company wouldn't take a 30k check
from an investor right now or agree to take 5 * 30k from a single investor
allocated monthly over the next 5 years. Also, him having more equity will
probably make him a more valuable/devoted employee so that needs to be
factored in.

~~~
dchichkov
You are right, and yet, when the salary had been established it should be
possible to talk about trading somebody's salary (money) for equity. And
compare that deal with the deal that the investors investing money get. As it
is possible to _take_ that 30k/year salary and invest is _elsewhere_ , on the
terms that investors investing money get (convertible debt, valuation cap,
etc).

Thinking about it as money allows one to make a prudent investment decision.

I'm actually surprised that YC people haven't streamlined that process of
trading early-employee salaries for convertible debt. Current situation with
early-employees equity really screws up a lot of early employees and in my
opinion poisons the startup atmosphere in the Bay Area quite a bit.

------
habosa
I've never worked at an early-stage company, so I have more questions than
answers. Isn't 0.2% basically nothing? Even if GoogleSoftBook buys the company
right now for $100M, you get (at best) $200k. And that's not going to happen.
Probably more money will be raised, your 0.2% will be diluted, and a $100M
exit is rare. So you'll end up with less than 1yr of salary for all that risk
and lost salary/benefits in the meantime.

I know it's not all about the money, but in this conversation we are only
talking about money.

~~~
garry
I was employee #10 at Palantir and received and accepted an offer in this
ballpark. I'm pretty happy with it at this point. Frankly it was absolutely
life changing, both from a learning perspective and a compensation
perspective. Of course that's an outlier — but this is why you should treat
what company you join the way investors think about investments. Only they get
to diversify and your choice is even more important — you only get one shot at
any given point.

rgbrgb's point is also well taken. You should be able to swap equity for
salary, since for a pre Series A company that's a chunk of coin.

~~~
habosa
Very true, although Palantir is probably one of the top 10 most valuable and
technologically interesting startups of the last 10 years so you made a great
choice.

$130k is a lot of money and, like you said, being in the first few employees
is a great opportunity for personal development. I just feel like you have to
consider the 0.2% to be a lottery ticket because most of the time it will end
up being worth nothing or very little.

------
cuca_de_chumbo
Also, I'd be leaving a job I really don't like at a Silicon Valley spinoff.
$150K salary, 0.75% equity, shiny CEO with regular Fox-Business-News
appearances, rising company notoriety, selling into a hot market. The company
will never raise more "venture" funding, the parent will structure future
injections as debt (at a reasonable interest rate, likely, but probably less
onerous than VC).

This current company has a highly dysfunctional development culture, no
automated testing, poor choice of deployment vehicle, a VP high on the DK
spectrum. I can't bear it.

The place has a very high likelihood of acquisition in the next 2 years. It's
a question of how long product dev can go on before the product implodes vs
how quickly the shiny CEO can attract a good buyer for the polished turd. I
lose a bit of my soul every day.

~~~
Domenic_S
Are you there for the money or for the love? If money, stay and suck it up. If
work represents a large portion of your happiness, bail.

2 years is not really a long time to live in suck-it-up mode, although your
perspective will depend on which side of 30 you're on.

~~~
cuca_de_chumbo
On the way-later side of 30!

The current company is legacy-land as far as development tools goes (though
they're reliable and in the right hands do very well). The prospective startup
would involve new tools I need to "keep up-to-date".

I did a short (paid) project for them involving some popular scripting
significantly-hipper-than-Perl language and delivered it in serviceable,
idiomatic form that I know they were very happy with, using all the right
libraries. I picked it up the tool/language quickly enough. I feel I need that
experience and exposure to maintain my longevity in the SW market. Sticking
with the current company is 2 more years I become more of a dinosaur.

~~~
hluska
Honest (but uncomfortable) question. You wrote:

 _I feel I need that experience and exposure to maintain my longevity in the
SW market. Sticking with the current company is 2 more years I become more of
a dinosaur._

Is the new company aware that you feel like this, both about their tools and
about your career?? If so, I wonder if they're compensating you as a more
junior developer, simply because it sounds like you think that you need them!

------
_b
The offer isn't generous but it is reasonable.

Sam Altman estimated that employees 10 through 30 combined should get at least
5% of the equity, That implies an average of 0.25%, which is fairly close to
0.2%.

[http://blog.samaltman.com/employee-
equity](http://blog.samaltman.com/employee-equity)

If you want to work for the company, equity is important to you, and you think
the offer is below was your contribution to the company will be, then
negotiate for the right amount of equity.

------
aetherson
What do you think you could get in terms of salary at the best-paying company
that you could be happy working at?

EDIT: Actually, let me expand.

1\. That does seem like lower-than-expected equity for a senior employee at a
small start-up that's pre-series-A.

2\. But on some level, I don't think that should be the controlling factor.
I'm assuming here that this is a pretty run-of-the-mill seemingly doing-well
pre-series-A startup. That is, it'll be at least five years, and probably more
like ten, before it monetizes, and the chance of it monetizing is sub-10%. And
your options would vest over the course of 4 years with a 1 year cliff.

3\. So that said, if you're going to be there 4 years, and the company is
going to do well enough over those 4 years for us to care what your equity is,
then I would assume that 4 years from now, you'll be a critical member of the
leadership team. The company will have had to grow a lot, you're senior
already, so... right? There's plenty of chance to, in that case, have your
equity position "right-size" with the company. To, in other words, re-grant
stock based on whatever inflation happens and based on how you work out as a
member of the inner team of the company.

4\. And given how far off any equity payout is, and how uncertain it is, I'd
think that your decision to go with the company should be based on salary,
what you expect the salary to do in the next year or two, and whether you
believe that you can become a member of the leadership team of the company and
whether you would enjoy all of that.

5\. If, on the other hand, this company has some kind of special sauce that
means that equity payout is more likely or more near-term, then, well, maybe
that justifies the lower equity award.

------
sharkweek
I've received equity in three companies in my 10 year career thus far and have
seen exactly zero dollars from any of it.

Maybe I'm jaded, but I'm not sure I would ever again consider the equity
portion of a job offer unless it's a stock option at a publicly traded
company.

------
webwright
That is low, but that's a big headcount for pre-A-- did they raise a huge
seed?

That aside, you earn equity with risk, so my question to you would be: "What
are you risking?" Certainly there's an opportunity cost (you're risking not
working somewhere else). If you think your work-remotely-market-rate for a
non-startup (i.e. no stock) is X, then you are risking X - 130k per year for
0.2%/4 (vesting over four years). So if X is $150k, you're buying those shares
for $80k (4 years of salary difference). Is that a good bet in your eyes? It'd
only be a good bet in mine if I had fairly heroic belief in the startups shot
at "unicorn" status or if I was really excited about the work/team.

However, if you think $130k is a reasonable salary for remote work and the
contribution you'll be making (it could well be), then the stock is a high-
risk bonus.

Regardless, you should certainly negotiate for more salary OR equity
(whichever you care about more) every time.

------
smt88
Equity is worth nothing, especially when it's that low. Don't even consider
the equity when you make this decision.

Honestly, a healthy company that really believes in a strong exit in the
future should be willing to match your previous salary. You should ask for
$150k and skip the equity. If you work there for 5 years, an extra $20k/year
is worth more than 0.2% in a $50M exit.

------
wheaties
Assuming a $100M exit, no dilution, $150k/yr elsewhere, no gains from
investing the salary difference, same salary raises per year, no additional
equity.

after 5 years, you net even. Anything longer than that you lose out. Anything
shorter, you make more (sans taxes.)

Seems like a risky bet to me.

~~~
ctide
And no dilution is not realistic given that they haven't even raised a Series
A yet.

------
mbesto
Two key considerations:

\- Does the company (and it's investors/accelerators) have some sort of
prestige that many people outside of the company would recognize? (i.e. if you
put it on your resume will it look good later)

\- Ignore equity at this point (as the chances of it really paying off massive
dividends are unrealistically low). Is $130k range in line with what you
expect to earn?

(note - $130k is comfortably livable in pretty much anywhere in the SF Bay
area)

~~~
Domenic_S
> _(note - $130k is comfortably livable in pretty much anywhere in the SF Bay
> area)_

That depends on a ton of things.

~~~
mbesto
Care to elaborate?

~~~
Domenic_S
Sure.

People have wildly differing opinions of what "comfortably livable" means.

To me, sharing an apartment without a dishwasher is not comfortably livable. A
decent apartment anywhere between SF & SJ will run ~$3k or more, and $130k is
~$6k/mo after tax (this is assuming single, no mortgage, no kids). Minus
another probably $1k for student loans, another $1k for retirement or home
purchase savings, that leaves $1k/month to live on.

The numbers are rough, but my point is you can either "live comfortably" and
spend everything, or live like a spartan and save money.

To someone without attachments (no spouse, no kids, young) this probably is
living comfortably and it's a boatload of money. To someone else paying for
childcare for a couple kids and trying to get into a good school district,
it's not so comfortable.

There are certainly ways to hack the system, most notably to live somewhere
outside the RBA (Morgan Hill, Petaluma, Concord/Antioch/etc). The Bay Area can
be your oyster at $130k, but only if you have no monthly obligations but your
own breath.

------
cj
$130k is well above average for a pre-funded startup in SF - Where are they
getting the cash to pay you? Are they profitable?

0.2% sounds a bit low.

IMO it's not a bad starting point for a negotiation. If you're expecting
something significantly higher, it might makes sense to look at later stage
companies (or a company like Google or Facebook if you want to maximize your
earning potential)

------
brudgers
It doesn't sound like it's your dream job. It might or might not be good
enough for now.

I wouldn't take the low equity offer personally, at 8 engineers, you're not
their first hire, and the position is more or less "need another engineer" at
this point. On the other hand, it does mean that hiring you in particular is
not the priority.

It's ok to be ok with that and its implications for the way your role will be
perceived in the workplace over the short term. It's ok not to be ok with
that. Working remotely may or may not be worth it.

In the end, I suspect that top pay and wow! equity aren't going to attach
themselves to many _advertised_ remote positions. It's when remote work is how
a company gets the specific individual they want that those are more likely.

Good luck.

------
lojack
The first thing I'd do is look up their funding on AngelList. This can be an
indicator of what the equity is worth -- without knowing the terms it's only
an indicator though. These numbers are also useful for determining how stable
the company is. If they have 8 engineers and 10-12 other employees but only
had a $500k seed round, it's a very risky job -- if its closer to $2m, its a
bit safer.

As far as actual numbers go, that's entirely dependent on what you think
you're worth, and what you think that equity is worth. You're the 21st
employee, and they are raising money, so it isn't exactly a red flag to me.
Treat the equity as a bonus that may never come to fruition.

------
gyardley
Almost twenty employees, working remotely so you're probably not management,
significant traction already, likely access to additional capital - okay, the
equity seems a little low for 2015 but not _obscenely_ so. There's more equity
out there, but for riskier situations - earlier employees at companies with no
prospects of further funding at their current level of traction.

Since your equity has a relatively small chance of being worth anything
anyway, 'significant traction' or not, I'd focus on the things that'll
definitely be a factor in your life - things like the work, the people, your
salary, and so on.

------
omgitstom
Talk to them about it.

Are you excited to join the company? Do you believe in their vision? Do you
find excitement in the problems that they are helping their customer's solve?
Do you feel good cohesion with the founders and the engineering team?

Answering those questions are far more valuable in deciding to join a startup
vs compensation. The compensation piece, if you feel is low, research and
negotiate for it. If you can't find a common ground on compensation that would
make you happy to work there, then don't join them.

~~~
cuca_de_chumbo
Their vision is great. They don't do rocket-science and they're not involved
in social. Their market is positively boring, and it's something everyone
needs, and nobody seems to have updated software addressing this market. Their
approach requires a good core and also a lot of reliable peripheral
development. I don't think there are any technical misgivings on their part
toward me (I've proven my ability, programming-, vision-, and communication-
wise), and I like working with them. I'm not sure we can settle on anything
after the lowball though ... it betrays their lack of respect for the position
or else for engineers.

~~~
Domenic_S
They were right to give you the offer they did looking at your reaction.

$130k is not lowball. 0.2% is not lowball. Both are on the mid-to-low side of
appropriate if we take you at your word for skill and fit.

More than that, respect has nothing to do with it. Just rm -rf that whole
train of thought from your head. Compensation negotiations are _negotiations_
, which means this is a conversation. Conversations go two ways. If you're not
happy with the offer, counter.

~~~
lawnchair_larry
Lowball is a strong word, but it's below market. If startups can't compete on
total comp, they have to pad it with equity. OP is getting worst of both
worlds. 0.2% of a pre-VC company is absolutely nothing, and there are several
engineers ahead of him for seniority, so he won't even get title inflation in
the end.

It's not that it's an insulting offer, it's just that they can't afford you.
For a fresh grad, it would be a pretty sweet deal.

~~~
Domenic_S
$130k cash is very strong from a seed-funded startup. I agree completely with
your final sentence.

------
Bahamut
0.2% is way too low IMO - it's possible to get that type of equity from a
post-series A startup.

That salary is also low for SF based on what I've seen too.

~~~
toomuchtodo
What would be a "fair" amount for the first 10-15 engineers of an early-stage
startup?

------
frozenstorm
Ultimately it needs to sit well with YOU, right?

Negotiate for more equity and weigh

\- the final offer vs. what you think you could get in the rest of the market

\- how much happier you'd be at the new gig vs. waiting around for another gig

I know nothing of how much equity is 'fair' for early hires but ultimately
it's about where you'll be happiest, money / equity aside. Do what makes you
happy and you won't have regrets.

------
benwerd
It's probably inexperience. I'd try and talk them up a bit.

But other commenters are right: pay attention to the salary, the benefits and
the position itself. The equity is a lottery ticket. I do believe they should
correct the amount to make you feel valued, but that's the only reason.

------
heimatau
I'd ask for either more money or more equity. Don't short change yourself. If
your overall goals are just looking for more experience then go for it if you
think it would be fun.

Corporations assert their power all the time. There is nothing wrong with you
asserting your worth. Good luck!

------
meritt
The salary is low and the equity is hella low too. You'd do better to
negotiate some sort of bonus structure instead of equity.

What do you want outside of financial incentive? Is it something you're
excited about?

What's your background? A lot of us are hiring.

~~~
garry
For a seed funded startup, that's a nontrivially high salary. It's common for
Series A companies to pay market, but a little unusual this early in the
company's life.

Bonus structures are great for cash generating businesses, but have limited
upside for startups that have the potential to grow 100X to 1000X.

------
copsarebastards
0.2% equity isn't worth considering. At best it's maybe a years' pay 5 years
from now, and the best is not likely to happen. A $20K increase in salary
would make you that with much more certainty in 6 years.

I'd look at salaries for your skillset and location on GlassDoor, compare that
to the $130K, and make your decision based on that.

In any case, I'd go back to them with a counteroffer. If you want more equity,
I'd ask for 2% and hope for something like 1.2%. But unless you're very
confident in the direction of the company, I'd choose salary over equity any
day.

------
iuyoiuyy
Been there done that. The answer is: No! Think of a start-up founder like a
con-man trying to sell you snake oil.

~~~
cuca_de_chumbo
Thing is, three previous startups turned out not-so-bad (net positive) for me.
Not home runs, but they made a material difference. I also like the small-
company environment and challenges -- but perhaps that's only because I have
worked only in startups. I look at "HN Who's Hiring" posts by outfits like
Walmart Labs and wonder what the difference would be.

~~~
Domenic_S
Your grievances about your current company:

> _This current company has a highly dysfunctional development culture, no
> automated testing, poor choice of deployment vehicle, a VP high on the DK
> spectrum._

That sounds EXACTLY like Silicon Valley Generic BigCo to me.

