

Ask HN: How much equity should I ask for? - heri0n

Hi guys.  I will be joining a startup that has received some funding already.  There are 2 co-founders so, I will be the third employee and the first technical one/programmer.  This is my first time working for a startup so I'm not how much equity I should receive/ask for.  I will be compensated in a combination of stock and salary.  What do you think would be fair?
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chrismoos
Here are a few things you need to think about:

1) How much do the founders need you? This will be helpful in negotiations. 2)
How will your role in the company effect its success? 3) How important is
salary to you?

All the above will give you an idea of how much equity you can get (or are
worth). Use the answers to these questions to help you negotiate.

If salary is really important to you then expect less equity. If you really
believe in the company and are willing to work to make it successful then
maybe you should go towards more equity and take less salary. This will pay
off (much more) in the long run.

I would recommend that you let them make you an offer first. This will give
you a baseline on what their expectations are. They might say.. 60K/year and
20,000 options. You need to ask them about the options:

1) What percentage of the company is the employee options pool? This might be
10 or 20%. 2) How many shares are in the option pool, or...what percentage of
the option pool is 20,000 options. This will help you determine what _actual_
percentage of the company you may be entitled to. 3) What is the vesting
schedule?

Remember one thing when negotiating: You need to ask or you will not receive
:).

Good luck!

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carbocation
The point that fishcakes raises is one important element. Make sure to
understand the picture fully (not just the % of common shares currently
outstanding, but the % of the company if all preferred shares were fully
converted to common stock, etc).

There is something of a red flag in how you've phrased your question. It's
curious that you say that you will be joining the company, but then your post
is all about the fact that you haven't yet negotiated the equity you will be
receiving. This makes the most sense when you only are _considering_ joining
the company. If you already have an agreement to join, then this agreement
most likely stipulates what equity you are owed, and on what schedule it will
vest.

Part of the overall package that is required to convince you to work for this
company should include a specific % of the company's equity. Surely your
bargaining position would be stronger if you hadn't already agreed to work for
the company when making an ask for equity.

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Retric
As a non founder think of it in terms of what your (worth to the market - what
they actually pay you) * risk your willing to take. So if you can get a job at
Microsoft for 110k + 25k in benefits, and the start wants you for 70k + 15k in
benefits then your giving up 50K in salary per year and you need to get enough
shares (which are probably worthless) to make up for that * the number of
years it takes you to vest.

As a yardstick I would aim for 1.5x the rate of whatever the last round of
investment was. AKA if they got 5 million and your giving up 50k then look for
10% of whatever the investor got vested over 3 years. (Also, the further from
your market rate the shorter your vesting schedule needs to be.)

PS: Don't forget the idea is paying you in stock needs to be more expensive
than paying you in cash or they are going to want to pay you in as much
worthless stock as possible.

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fishcakes
Key thing is to ensure you understand the equity in terms of its percentage of
company. Ie not just how many shares, but also how many shares are
outstanding. I have seem lots of very talented engineers make this mistake.

~~~
launchplus
I just made this mistake last year when I joined a startup that offered me a
below-market-rate salary + % shares to "cover" for the lowered salary.

Sounded like a good deal as I was naive and this is my first time joining a
startup and having to deal with all these equity thingy. Turns out after
converting all preferred shares to common stock, there's virtually nothing
much left.

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legoman05
You're actually employee number 1 - as in theory, the co-founders are only
taking home enough money to keep a roof over their heads.

You're also the first technical member, which means that you'll be building
the entire product. You are responsible for the execution, which means you are
critical to the success of the company.

Start negotiating at 20%.

