
How I negotiated my startup compensation (with numbers) - wetzler
http://blog.keen.io/post/29904565692/how-i-negotiated-my-startup-compensation
======
fratis
A tip for people writing on corporate blogs: let us know who you are up front.
Whether there's a byline under the title or a short intro sentence/paragraph
preceding the article, knowing who you are gives the reader a way to frame
what your story.

Because the tech industry is so heterosexual male-dominated, when I read that
the author was engaged to the CEO, I first assumed I had misunderstood, then I
thought the author was a gay man. Only upon reading further did I find that
the author was a woman.

That confusion could've been cleared up in the first paragraph in which
Michelle writes, "I’ve picked up quite a bit just by being around our CEO,
Kyle, for the past few years." Why not tell us here _why_ she's "been around"
Kyle for so long? Further confusing the point, she mentions later that she's
"friends with all of the founders." _And engaged to the CEO_ might've been a
helpful addition.

This kind of information completely changes the context of the advice –
negotiating with a stranger is a completely different dynamic than negotiating
with someone you (I assume) share a bed with.

~~~
Simucal
That bit of information about them being engaged was just kind of sprinkled
into the middle of the article as if it was of no significance.

~~~
nutjob123
Yeah, it completely changes the dynamic of the situation. I can't imagine many
other people are really going through a salary negotiation with their fiance
as the other party.

~~~
rdl
I usually let someone else handle financial negotiations if I referred someone
into a company (even if I'd otherwise be the one doing that), unless it's a
totally mechanical calculation. I'm not sure how I would do that with a
fiancee.

------
chasing
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-ton! How
much of an exit would Keen.io have to have in order for that to pay off if
she's on a reduced income for, say, four years? She'd have to get a couple
hundred grand off of that exit. Will her share of equity get her that?

Anyway. This isn't a negotiation. And she didn't fully run the numbers.

[Edit]

I also wrote up my experience negotiating with a start-up
[<http://auscillate.com/post/238>]. I'm pretty naive about this stuff, but at
least I attempted to answer some of the issues of the value of equity.

~~~
tptacek
I'm not sure what this critique has to do with the point of the article. This
is, I think, a more careful (and lucrative) negotiation process than 99% of
engineers are apt to us. The point of the post was to explain that process,
presumably in the hopes of benefiting other startup employees.

Do you disagree with the methodology? How? Let's talk about that, and not what
you think about the blog author's personal life.

~~~
rprasad
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.

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

~~~
rprasad
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.

~~~
dkador
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.

~~~
tomkarlo
Did the team contemplate in making this offer that if something went sour in
that relationship, you'd end up with a CEO who has both personal drama and
potentially a very difficult situation in the office, given that she'd be
reporting to him? How did your corporate counsel feel about this? Your board?

If she's not reporting to the CEO, how does her new manager feel about having
a team member who's his bosses' fiancee? Would he be comfortable firing her if
she fails to perform?

I know this seems hypothetical, but I think anyone who's been around startup
has seen some variant of this play out multiple times. It's bad enough when
it's friends; it's even more treacherous when it's a fiancee/wife.

~~~
tptacek
I'm biased, as I work with my spouse, but this is I think an overblown
concern. People leave companies for all sorts of reasons, many of them dumb.
They do not need to have made a lifelong personal commitment to their manager
to find those reasons. Also, people do not need to have made that commitment
in order to access their unprofessional self; normal team members find ways to
be deeply unprofessional without entangling their relationships into their
companies.

Yes. Strictly speaking, if you get into business with your significant other,
you are increasing the cardinality of the set of things that can go wrong with
your team. For people that think like us, maybe that's where you stop
thinking, and if so, fine. But the set we're talking about is very large, and
I also know high school statistics, and so can observe that the relationship
stuff is unlikely to be the event that blows up your team.

Believe in working with your spouse (or close friends, or whatever) or not.
Either way: it has nothing to do with negotiating for a job, and it's a little
creepy to bring it up here.

~~~
ChuckMcM
Well as long as the reporting structure at work is the same as the reporting
structure at home I'm sure it can work. When they are reversed its a recipe
for disaster.

~~~
tptacek
I'm not sure what you mean here. The working relationship I have with Erin is
nothing like my home relationship with Erin.

~~~
ChuckMcM
I worked at a company where the husband was the CEO and the wife reported to
him. But at home it was pretty clear the wife made the decisions and the
husband reported to her. As a result we got to experience the CEO making some
decision which the wife disagreed with, only to have the decision changed the
next day after they had spent some time out of the office. It was
uncomfortable for everyone, and ultimately fatal to their marriage.

------
tptacek
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 to maximize the number.

The offer side of this post makes my head hurt though.

    
    
        70k with .5% equity or
        60k with 1% equity or
        50k with 1.5% equity or
        40k with 2% equity
    

This offer says that 1% of the company is worth $20k. The company is worth
$2MM. _Late note: this analysis is silly, see comments below._

Later:

    
    
        Inputs:
        -        Employee’s market salary 
        (I used my current salary, plus bonuses)
        -        Salary offered by the startup 
        (I used my offer, plus benefits like rent subsidy)
        -        Company’s valuation 
        (I used $5M, the cap for Keen’s seed note)
    

No, it's $2MM, the CEO just told you so, right?

Frankly, an offer with a .5%->2% spread between possible equity stakes is a
red flag. Those are _wildly_ different equity grants for the exact same role.

Also:

 _Our expected net worth after a few years in our existing management
positions was, by any practical estimation, the most financially sound outcome
– and a very good one, at that. Even if things went great at Keen, with a big
Series A or early profitability, we’d probably make less._

What does "a big Series A" have to do with your long term financial outcome?
The A-round money goes to the company, not to your family. How many companies
with "institutional" VC rounds fail? Answer: most of them.

~~~
rdl
It's pretty common to subsidize employee equity because employees having
equity are incented to work, and because common generally is discounted to
preferred by a larger factor very early in the formation of the company. It's
reasonable to simultaneously treat employee equity as $2mm valuation and
investor equity at $5mm valuation, especially with a note.

In this case, though, I think the way to win the negotiation is to walk. A
competent engineer is more like $150-200k total comp in the bay area, and
doing that as $100k + 100k of equity/yr in a real company is pretty plausible.

A more plausible story is offering $50-100k and then equity levels which ramp
up rapidly as you go down to $50k. Someone taking $50k vs. $60k should get
_more_ than $10k x 4 of extra equity. Maybe something like 100/0.10 90/0.15
80/0.25 70/0.40 60/0.6 50/1. Then, if you need to prioritize candidates,
absent other factors, the 50/1 people have a plus mark.

~~~
tptacek
I'll admit: my issue here comes down to _hating_ sliding equity/salary scales
like this one. The rough amount of skin you want a team member to have in the
game should be a part of the role definition, not a detail of the comp plan.

There have to be better ways to account for sub-market salary than a
salary/equity scale _multiple percentage points long_. Ick.

~~~
rdl
I'd probably have a range for the req (based on budget), and make an offer
with two points (specific to the employee). The market is weird enough now
that if you wanted to hire an SSL protocol expert, you might end up hiring
someone with 2-3 years of general security and dev experience who has read the
book, or someone who is EAY, and even the first option might be better than no
one in many roles.

I've heard Palantir does three offers, and taking the top cash one is a bad
signal.

Also, I think employees undervalue equity, and there's a weird signaling/etc.
effect where shitty companies give out equity freely, good companies don't.
Cash is cash, though.

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

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

~~~
rdl
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.

~~~
tptacek
This person isn't an office admin. I don't know where that notion is coming
from (elsewhere on the thread, I assume), but it's a little disturbing.

~~~
bmm6o
I didn't read the comment as referring to the author as an admin, it was just
offering a lowly position stand-in in the current hypothetical.

~~~
rdl
Yeah, that was that I intended -- a general example. Given her previous salary
of $116k+, she was obviously in some kind of professional/technical IC or low
level manager role before.

------
joezydeco
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 vision/dental).

You can list "Health care! Woo!" on both sides of that offer, but I bet it's
way more detailed than that or completely missed in the equation altogether.
My personal difference in line items is over $14,000 annually.

~~~
potatolicious
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?!

~~~
joezydeco
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.

~~~
WildUtah
$2180 a month, $3000 deductible. Did your founders meet at a cancer remission
support group? Or is it just that hard to negotiate for a small group policy
where you are?

~~~
tptacek
He's quoting what sounds like a market small-group PPO normal-deductible rate
for family coverage in the US.

You can get the rates down by opting for an HSA-qualified HDHP plan (the
deductibles for those plans in IL are in the range of $5k/$10k-family). I'm
not sure how much lower the rate is, but normal-deductible insurance is not a
good deal for most people.

If his founders met at a cancer remission support group --- or, for that
matter, the support group for any of a list of hundreds of self-evidently
nonfatal medical conditions, most of them affecting women --- he would not be
able to get insurance _at any price_. _At any price_. He would not get "dicked
over with worse rates"; he simply would be unable to set up small-group health
insurance for that group at all, under any circumstances, unless he excluded
members of his group (or fired them). People with those conditions, which (it
should not surprise you) are very common, and which very rarely implicate
expensive treatment demands down the road†, can obtain insurance only by
accepting jobs at companies with large group health plans.

It is sad for me to have to call this comment out for being naive, because is
naive in the face of a terrible injustice that also happens to be a thorn in
the corneas of many startup founders, but it's naive.

I know several very smart startup founders that have families who are opposed
to guaranteed-issue health insurance, but I cannot personally for the life of
me fathom how they arrived at that opinion, having myself had to go through
the shitshow that is securing family health insurance coverage on the private
market.

† _But actuarially incur high costs enough to fuck over multiple percentage
point-sized swaths of the whole US population_

~~~
joezydeco
Thanks for the backup. Tom is totally on the mark.

Every time I encounter a conversation about healthcare in the US, all I do now
is ask if the other party has ever tried to purchase private coverage for
their family on the open market. You have _no_ standing to discuss the true
situation in this country until you have.

I did it 7 years ago and it was hell. Absolute hell. I can only imagine it's
gotten worse since then.

To add a data point, I dug out the medical rate information from my offer
package three years ago. The Family PPO premium was $17,000 annually, of which
I paid $9600. The Family PPO with $5K HSA was $12,500 to my employer, $5000 of
which I would have had to pay. At the time I was easily consuming $5K+ of
services for my children, and I had awful experiences with a previous HSA, so
the normal PPO was my choice. The rates have jumped 30% since then, and my
employer has absorbed most of the jump.

------
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.

~~~
wetzler
Totally strange. I did most of the negotiation with Dan, our CTO, though Kyle
(my fiance) is the person who gave everyone the first verbal offers. I just
updated the blog post to make that more clear.

I think in the end being friends made the negotiation much easier. I am
confident we all wanted what was fair for the business and each individual,
and were able to talk at length about that until everyone felt comfortable.

~~~
alttab
I too find it incredibly strange and most importantly _dangerous_.

1) You are intertwining your MARRIAGE with work. Rule #1 is don't shit where
you eat.

2) You make matters worse because your husband is your boss. This will screw
up the relationship dynamic, and that's not necessarily a guess, Im 99%
certain it will be hard to separate, especially with longer start-up hours.
Good luck, you'll need it.

3) You are putting all of your eggs in one basket. Sure its convienent, but if
the start up fails, you are BOTH out of work.

4) Putting all of this on the company blog, with screenshots of e-mail
correspondence and even prices is very strange, and either you don't know what
you're compromising by doing this or it is a veiled attempt at advertising
compensation packages on HN.

Generally, I don't think you or your husband's strategy will play well for
either one of you in the long run. Others have said your finances will be
joint, so why does it even matter what you get?

Seriously, this is really weird. I'm sure you're confident it will work, but I
know first hand that mixing friendship (and in your case MARRIAGE, jesus) with
work is dangerous and _rarely_ ends well.

Good luck. My opinion is you both have made a very big mistake.

~~~
wetzler
I find your response to be a bit dramatic and troll-y, but you do raise some
valid, common concerns which I will address now for the sake of others who
might be curious:

[don't shit where you eat] If things start to get uncomfortable, for whatever
reason, I can get another job. I'm smart enough not to be 100% confident
things will work perfectly. However, I have lived with Kyle and the other
founders for 8 years. We have a long and stable history.

[your husband is your boss] Kyle is a leader, but he's not my boss. We are a
six person company and no one here has a boss. We treat each other as peers.
So far it is working great. If we need to establish a hierarchy at some point,
I trust we are capable of architecting it wisely. We are kind of obsessed with
the organizational design of the company.

[two eggs, one basket] I'm not too worried about either of us being able to
find a job. We have valuable skill sets which are in high demand. Plus, I have
savings from my previous job.

[why did you blog this??] I put this on the blog because I thought it would be
helpful to other people. It has received overwhelming appreciation.

Keen allowed it on the blog because we support a culture of transparency and
because we think maintaining a blog that is useful to the tech community is
helpful for our business. So far, it has worked very well.

[your finances will be joint, so why does it even matter what you get?] I'm
offended by this question. I have always been the high earner in this
relationship, and I still am. My salary matters a lot to me. The only way your
question makes sense to me is if you think Kyle is rich (he's not), if you
think he makes all the salary decisions in the company (he doesn't), or if you
are speaking in the context of antiquated gender roles.

[you're weird] Thank you.

~~~
alttab
I'm sorry you feel I have "trolled" you. Not my intention. This was simply far
enough away from what I normally encounter to justify voicing my opinion, not
that my expectation would be that you would reconsider.

For clarification I never called you weird, ad hominem isn't really my thing.

And there is of course room for me to be completely wrong. I'm sure you're
educated enough to avoid the most common pit-falls. It is simply my preference
that given the opportunity, I wouldn't have made the same decisions.

Given the statistical risk of problems arising from this configuration, I
can't imagine what the payoff would be that would justify the exposure.

------
rdl
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.

~~~
rm999
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.

~~~
rdl
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.

~~~
rm999
> 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"),

Interesting, I read somewhere that Google pays taxes on their free food. How
do they argue the free food is for their convenience when their employees can
just go out and purchase food and eat at their desk? Especially non-essential
foods like snacks, smoothies, etc? Either way, I still think people overvalue
free food.

>Similarly, I'd value a 30" monitor at about $1k/yr salary.

Why? Buy a 30 inch monitor for 1200 dollars with your own money, write it off
on your taxes, and you've spent less than 1000 dollars of income on a one-time
payment. And now you own a 30 inch monitor!

~~~
dorkitude
One thing worth noting: You have to hit the so-called minimum deduction (9K
last I checked) to benefit from this sort of write off, whereas a company can
do it regardless of absolute annual business expenditure.

------
diminoten
Wait, this line confused me:

> Another thing that made this situation complicated was that Kyle and I are
> recently engaged.

So, your fiance is Kyle, who is the guy you're doing negotiations with for her
salary?

The methodology is extremely useful, but I feel like that makes this story
extremely specific. Like you said,

> I told him that, if I got this offer from any other company, he’d be the
> first person I would ask for help.

~~~
wetzler
OP here. You're right - it was confusing! I tried to evaluate my offer
objectively and wanted to share the tools I used to do that (as well as get
feedback on the approach). My relationships with the founders were a key part
of the story that I didn't mention until late in the post. I added an intro
which hopefully makes it more readable now.

------
richcollins
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.

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

~~~
richcollins
You're right, you'd have to wait 2 years:

 _have made at least $200,000 each year for the last two years (or $300,000
together with his or her spouse if married) and have the expectation to make
the same amount this year."[1] This rule came into effect in 1933 by way of
the Securities Act of 1933.[citation needed]_

You wouldn't for my "even better" option.

------
rburhum
>"Another thing that made this situation complicated was that Kyle and I are
recently engaged"

Even if she got double (or even four times) the equity, does nobody else think
this is a disaster waiting to happen?

------
markokocic
Sorry, but I just can't take this article seriously. It's all fine and dandy
that all of them try to act professionally, but they all live in the same
home-office-appartment, are close friends, some of them in serious relation or
engaged, and then they all pretend that they are doing some real negotiations
based solely on numbers? I mean, negotiating salary and equity with future
husband. That's not negotiation, especially not in business sense.

I don't want to underestimate their competence, or prospects of their startup
success, but this is not how negotiating in the real world works. Next time
someone apply for a startup, you can't expect that your roommates are there,
that startup is located next to your kitchen, and that your fianacee will
negotiate about salary with you.

------
temphn

      Another thing that made this situation complicated was 
      that Kyle and I are recently engaged. 
    

This is a cute article but for obvious reasons completely inapplicable to
anyone else seeking a job at a startup.

~~~
wetzler
I wrote this article because I wished it existed when I was going through
this. Even something as simple as an example of a early employee's salary at a
seed-funded startup is helpful. I also think the links I shared are pretty
good. I'm shocked that my post got over 150 tweets today -- many of them
saying "read this if you're considering joining a startup" or "great read". I
thought some people might take interest in the story, but I'm completely
surprised by how many did. There have been over 16k unique visitors since I
posted it this morning.

~~~
danenania
I think that regardless of how much influence your friendships and
relationship had on the process, your analysis was thorough and very
interesting, so I personally got value out of reading it. Thanks!

------
sync
Does 1.25% seem ridiculously low to anyone else? It seems to me like she
should have negotiated to be a co-founder instead of employee #1.

~~~
riazrizvi
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.

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

~~~
colmvp
Not to mention her current salary is 140k (after bonuses), which I think would
be quite a bit above what most office managers and QA people make.

------
peacemaker
Interesting post, though $70k to live in San Francisco? That's going to be
pretty tough, honestly it's crazy expensive here.

~~~
ChuckMcM
Did you miss the rent subsidy part? It was listed at $12K, so $1K/month. But
lets step back from that for a moment.

$70K gross income. Lets say you put $2K into an IRA (no 401k) so $68K after
that. Estimated federal tax is $10,592 [1], Another 6.2% goes to Social
security so $4,340 [2], estimated state income tax (CA) is about $3,922 so
rolling that up, $68K - $18,854 in taxes thats not quite $50K left over
($49,146) so that is about $4095 a month.

So if you're living on $4095 a month you're looking at spending $2K on a
studio apartment [4] minus the rental subsidy of $1k making it $1k on the
Apartment. Call it $500/month on food, $250 / month on subscription services
(cable / phone / internet) and maybe $75 /month on rental insurance so maybe
half your monthly on recurring costs. Leaving you $2K/month for dynamic costs.
If you don't own a car (and I wouldn't recommend it) then you're basically
able to move what is left around for things like the occasional furniture or
clothing purchase. Going out to eat occasionally and saving for a rainy day.
It should be possible to put away $500/month of that into savings on typical
month.

The bottom line is I don't see $70K/month as 'pretty tough' :-) but I can
certainly see it not giving you a luxurious lifestyle.

[1] [http://www.calcxml.com/calculators/federal-income-tax-
estima...](http://www.calcxml.com/calculators/federal-income-tax-estimator)

[2] <https://www.socialsecurity.gov/OACT/COLA/cbb.html#Series>

[3]
[https://www.ftb.ca.gov/forms/2012_California_Tax_Rates_and_E...](https://www.ftb.ca.gov/forms/2012_California_Tax_Rates_and_Exemptions.shtml)

[4] [http://www.mynewplace.com/city/san-francisco-apartments-
for-...](http://www.mynewplace.com/city/san-francisco-apartments-for-rent-
california)

~~~
encoderer
While I agree with your sentiment about frugal living, in the spirit of being
realitic, $500 a month for food is awfully low.

At 3 meals a day, that's $5 a meal.

No easy feat unless you go for processed, preserved and packaged, which is
hardly a good way to live and eat.

~~~
ChuckMcM
Actually for one person $500/month is pretty generous if you don't go out to
eat, fortunately I think we can get really really good data here since Safeway
[1] lets you browse their products online. I typed in the zip code for Redwood
City where they deliver (94065) that gave me access to their products and
prices and then put together a shopping list that would provide 3 meals a day
for me for approximately 30 days [2]. I didn't use any coupons or sale items,
I included eating steak as well as chicken, but I do assume that cooking a
whole chicken would equate to the meat item for three meals, the initial one,
the left over one, and then perhaps any remaining chicken chopped up and put
into a salad. I included condiments although generally you won't use all of a
condiment 'unit' in a month, and I included a 5 dollar allotment for 'spices'
since you buy one thing of salt (0.99) and it lasts you for 6 months.

You can see that for breakfast I'm eating either cereal, eggs, or maybe
pancakes, for lunch its generally sandwiches with soup and a salad, and for
dinners its a meat (chicken or beef) a vegetable, and a starch (either rice or
potatoes). I didn't go 'all organic' or anything which could raise your
prices. I also included a half gallon of ben & jerry's ice cream, tea as the
'non water' beverage, and Oreos (my all time favorite cookie). All totaled its
$443. Under my $500 budget.

[1] <http://www.safeway.com/IFL/Grocery/Home>

[2]
[https://docs.google.com/spreadsheet/ccc?key=0Atwe7dq6iPQHdDU...](https://docs.google.com/spreadsheet/ccc?key=0Atwe7dq6iPQHdDU2bjNBY1AxMTE1R3pNMWVFLTgzZFE)

~~~
encoderer
Clearly you spent some time on that in the interest of a good discussion so
that's fantastic and helpful. It's eye openening to see what some people
consider normal costs. For example, I couldn't imagine spending just $5 on
EVOO. Even the cheap-but-good labels are more than twice that.

But the spirit of my comment comes from this:

After years of trying, I finally learned how to budget when I was about 25.
One of the most important lessons I learned then is that budgets are often a
time when people imagine the life they want and try to prescribe it to
themselves instead of taking an honest look at the reality of their behavior.

While you included steak and chicken, you didn't include any higher-end
proteins (including _good_ steak), nor any luxury items at all really. Nor, of
course, any dining. And while it's possible that a person can live to your
budget quite happily, it is, I think, more likely that the budget as-is
wouldn't be followed. That developer, whose friends easily make in the
$120-150k range in SF, are going to want to go to dinner with them. To meet
them for lunch. To have a dinner party.

Sure, there are exceptions. But I'm interested in the mean. What do you think?

~~~
ChuckMcM
_"After years of trying, I finally learned how to budget when I was about 25.
One of the most important lessons I learned then is that budgets are often a
time when people imagine the life they want and try to prescribe it to
themselves instead of taking an honest look at the reality of their
behavior."_

Excellent. There are two parts to budgeting, you mention the first one which
is understanding where your money is going, the second part is prioritizing
where your money _should_ be going. Part of the latter is understanding what
is (and what is not) withing your means.

So if you are making $70K and you're hanging out socially with people making
twice that, you are going to be at a disadvantage in 'expensive' activities.
Someone with $100K in income which is taking home over $1K/month more than you
after taxes, might decide they are going to spend $500 a month on track time
at the local race track (driving fast is very fun of course) that is way too
expensive for someone who is only making $70K. As a person budgeting you
always ask "Is this valuable, or is it expensive?" [1] understanding the
difference can really help clarify what you want to spend money on.

But lets think about the social aspects for a minute. Young people especially
(although it is present across age groups) have a tendency to 'brag' either
subtly or not so subtly using money. Called 'conspicuous consumption' back in
the day, you can recognize these people right away, they always have the
latest tech gadget, or a car that is less than 2 yrs old, or this seasons
fashion accessories, etc. Why they are like that varies but how it affects you
the $70K earner, and more importantly your budget, is key. You have to resist
giving into that way of validating yourself and your friendships and instead
actively pursue other paths. So if you're budget is being warped by those
kinds of influences you might seek out ways to avoid them. It is tough since
nobody likes to say "I can't afford to do that stuff that you are doing every
day" even when its the truth. However good friends will figure it out and
adapt.

Under no circumstances pretend you are something you aren't, I knew a guy in
the dot com days who was pretending to be a lot more well off than he was in
order to 'hang out' with some actually wealthy people. He got the bar tab once
at one of their events, it was a bit over $12,000. He had to call AmEx to get
them to approve it. I personally would not think the access was worth that
sort of shock to the budget but recognize different people value different
things way more differently than I.

[1] One of the engineers here at the office who has a background in economics
introduced me to that phrase and it really captures the essence of budget
prioritization.

------
jwoah12
Is this in line with expected salaries/equity for a #4-6 employee of a pre-
series A startup in SF? What about NYC? For some reason I thought equity would
be a bit higher for the first few employees.

~~~
balloot
That's about right. One of the biggest surprises to me as I learned more about
how startup equity works was the HUGE dropoff between cofounders and employee
#1 in terms of equity.

------
mjbellantoni
I wrote a tool a while ago to do this math:

    
    
      http://options-vs-salary.com
    

This is based on various blog entries I've read on the subject.

~~~
balloot
I actually just accepted an offer at a startup, and like the idea of a tool
like this because I had to approximate it. However, it's simply incorrect to
compare your startup job with an VC investment, and the numbers given by your
tool would create a situation where you would turn down almost any realistic
startup opportunity.

For example - let's play with the offer given in the article: 1.25% + $85k
salary (I'm including all extras in both salaries). Given that the author made
~$142k before, the tool says that if she expects a valuation of $100M on cash
out with a 1% stake (after dilution), she should have been offered $117k.
That's simply not money you'll get at a 5 person startup under any
circumstance, even given the very generous valuation estimate for a startup
with $800k funding.

Alternately, if you join as employee #15 or so, you're probably getting closer
to .1% of the company, and the calculator says that you should take a $3k
deduction off market rates on a $100MM expected valuation. That's also not
even close to what really happens.

The problem lies in the comparison to a VC investment. Because for a job
seeker, the real comparison is "take a job with standard salary". Your
calculator claims that if you could make $600k over four years at a "normal"
job and $400k over four years at a startup, you would be upset at a $1MM stock
payout because it wasn't 10x the $200k "investment". That is just totally
asinine.

In reality, a rational decision would take any salary/equity combo that has an
expected value (in the statistical sense) of $1 more than the market rate.
There is no multiplier.

------
efields
I'm going through this right now, sorta, tho I decided I need to be paid more
at the start-up I work for. I'm paying for health out of pocket so my left-
column is more like $80k. I'm basically looking for a raise to market value+
to cover out of pocket health costs. In my case, I feel like the stock options
exist in lieu of company-paid health insurance and a bonus.

I know a few people that cashed out at successful but sanely-priced
acquisitions (nowhere near silicon valley levels), and those vested options
are never more than low-to-mid 5-figures. In other words, 4-5 years worth of
bonuses at a consulting firm or agency.

The reality of a profitable acquisition is slim. You're better off getting
paid market rate and treating the options for what they are: just a really
good perk.

------
alexcharlie
Call me crazy, but I think people should not be compensated better because
they're good negotiators.

~~~
colmvp
I don't think you're crazy.

Learning about salary/equity disparity can be very demoralizing, spreading bad
team chemistry like a virus. This is especially true in cases where people who
happen to be good negotiators earned more money than the workhorses who
provided some of the biggest benefits to the company.

------
at-fates-hands
I'm actually surprised she gave up her 141K gig to go to a startup. If there's
one thing I've learned, you need to make your money when you can.

I don't know I would take a 50K reduction in salary as well additional
benefits to go to a startup.

~~~
wetzler
Thanks for reading my post :) I wrote about my decision to make the jump in a
previous blog post: [http://blog.keen.io/post/26096112831/why-i-left-
consulting-a...](http://blog.keen.io/post/26096112831/why-i-left-consulting-
and-joined-a-startup)

Some things to consider: 1\. Consulting work is still there if I need to
return to a higher salary. 2\. My salary in the startup will be adjusted if
the startup does well. 70k will not work out long term in SF, but it's ok for
a year or so.

~~~
colmvp
'1. Consulting work is still there if I need to return to a higher salary.'

Couldn't you technically do that same consulting work at your old job,
specifically after work or on the weekends?

I agree with your second point though.

~~~
wetzler
Not really, because I was managing large scale tech implementations. That's a
full time job and then some. I don't have the dev chops to little projects for
$XXX/hr. Maybe one day :)

------
kine
Some great advice I got when someone comes back to you and says "We'll give
you 16,000 shares" is essentially to ask "shares of what?"

One of the best questions to ask is "What percentage of the total outstanding
shares does this represent?" Since 16,000 shares could be out of 100K, 1M,
etc.

~~~
corin_
I read that in the article (she mentioned learning that same lesson), and
can't believe anyone would ever not do this. Would you really not have thought
of finding that out had you not been given this advice?

~~~
dorkitude
(Full Disclosure: I'm Kyle, the CEO mentioned in the OP)

I actually had this issue bite me in the ass at my first startup, where I was
offered a flat # of shares.

I was pretty much fresh out of college, but for the record, I _did_ realize it
was important to find out what percentage I was actually getting. When I asked
what the total # of shares outstanding was, the company snaked its way out of
answering the question directly. The job had a lot of perks (a big title, very
respectable pay, work-from-home, greenfield development), so I took the offer
rather than press the issue.

Eight months later, we were acquired. I was the only engineer. You could say I
was a _bit_ peeved to learn how little of the company I really owned.

------
carmaa
She forgot to factor in the dealbreaker; the fact that engaging in a startup
(or any other intensive work if you ask me) with your significant other is a
major risk in itself, and a bet where not only your career is at stake, but
also your relationship.

------
marcamillion
I love this. Congrats Kyle, Michelle and the whole team for:

a) Going through these types of negotiations with your loved ones (not just
close friends) and trying not to water it down - or give favors. There are
many people, that I imagine, might want to get an extra few pts of equity just
because you both are going to be married soon. So Kudos on keeping it
professional.

b) Making this entire transaction as transparent as you did. I am shocked at
all the details you guys laid out.

The only thing I would have loved to know is what Michelle was being hired to
do.

Is she a developer, business development, graphics person, what?

~~~
wetzler
Thank you!! I describe myself as "hard-working generalist". I'm good at
coordinating teams and getting things done. I've been working on short and
long term goal planning, customer dev, testing, documentation, and I wrote a
rails dashboard that uses our API. I'm also involved in our design and
strategy discussions. Lots of early startup stuff :)

~~~
marcamillion
Nice!

------
lancewiggs
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

------
endeavor
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?

~~~
dorkitude
Actually, we did that split for the last 5 years (I'm the CEO from the post).

If you're curious about Michelle's reasoning, check out one of her other
posts, "Why I Left Consulting and Joined a Startup":
[http://blog.keen.io/post/26096112831/why-i-left-
consulting-a...](http://blog.keen.io/post/26096112831/why-i-left-consulting-
and-joined-a-startup)

------
textminer
Interesting post and thought process. In the experience of HN readers, what's
the typical salary/options/benefits package you've seen given to first
employees of SF startups?

------
RMacy
Most of this didn't make sense to me, what resources could I use to get a
better idea of the topics discussed in the post? Book recommendations?

------
Kilimanjaro
Submarine. Sunken submarine.

Everybody will discuss about the author and the CEO being engaged and nobody
will remember the startup's name.

~~~
dorkitude
Luckily, HN comment sections are not the alpha and the omega.

A lot of people merely clicked the "up" arrow and refrained from comment, and
so far about 3000 of the post's readers have clicked through to our main site
;)

------
webjunkie
I somehow can't take people serious who still think it's a good idea to use
'here' as a link text.

~~~
dorkitude
You might enjoy reading this.
[http://www.dustincurtis.com/you_should_follow_me_on_twitter....](http://www.dustincurtis.com/you_should_follow_me_on_twitter.html)

~~~
webjunkie
Oh no... noooo... don't let that be true. Now I have nightmares.

------
lucian303
“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. I’m confident this is the best
move you can make for your career.” -- Kyle (CEO)

If I had $1 for every time I heard that about a startup, I'd actually have a
lot of real money instead of the worthless monopoly "money" a company offers
you as equity. At least you didn't get common stock so it could be diluted to
nothing later when the VCs and angels come in and eat up the company.

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.

~~~
usea
_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.

