

Ask HN: How to properly negotiate employee equity - KokoLoco

As first employee in a well funded biotech startup, how should one go about equity negotiation?<p>given a market-value salary, is 1% stock options considered above&#x2F;below average?
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brudgers
If the average company was a well funded biotech startup, then there would be
some basis for "above/below" average. But it's a one-off both in terms of the
company and your position and your other options.

Generally speaking, my opinion is that 1% equity is entirely worthless: not in
the sense that to a first approximation all startup equity is worthless, but
that it signals an unwillingness to share the value your employment adds to
the company. A first employee, even a receptionist adds more than 2% to the
value of the company, otherwise the person wouldn't be hired.

To me, 1% equity is a symptom of finite-pie thinking; a symptom of Owners who
believe that employees are costing them money. Don't get me wrong, it's ok to
work for someone who doesn't want to make you rich. Just be aware that they
are actively going about not making you rich.

To put it another way, the difference between 1% and 7% is nickels not 100
dollar bills. If the company exits at $100 million or more the large
shareholders get rich either way. But until the exit approaches $1 billion, 1%
doesn't let you walk away with "Fuck You" money while 7% gets you close at the
lower number.

Of course, 1% of $100 million is a nice payday. But 1% means that you don't
really have a seat at the table, and deliberately so. You will always be the
hired help and less equity means you are cheaper to replace and it is easier
to reduce the value of your equity to zero if the company is successful.

Good luck.

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dpeck
I just did a lot of research into this sort of thing, and thats fairly in line
with what you're going to see these days.

Being first engineer is going to pretty much sucks. You don't get founder
equity, but you'll deal with most of the same problems. Getting market rate
cushions that quite a bit though. In todays environment there is very little
risk for a developer doing a startup, if it goes down in flames another job
can be picked up the next day.

[https://www.wealthfront.com/tools/startup-salary-equity-
comp...](https://www.wealthfront.com/tools/startup-salary-equity-compensation)
is a nice visualization for funded tech startup equity percentage.

Realize that equity is very much a lottery ticket, and with 1% best case
scenerio is that you end up making baseball player money for a couple of years
when you look back at option value and have some nice incentives to stay on if
acquired.

Things to ask for:

Stock grant, not options. Being first engineer this should be doable and not
cost you much in the way of taxes since the company should have almost no
value from the IRS point of view. On the chance that you get a good outcome
you cut your tax liability roughly in half (US).

Single trigger vesting. Usually more for people who will be fired during a
sale like marketing, but I see no reason for technical people not to request
it. After a change of control you'll be fully vested and free to move on and
do something else or free to stay on for proper incentives.

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rahimnathwani
Where do you need help?

\- Valuing stock options?
([http://www.payne.org/index.php/Startup_Equity_For_Employees](http://www.payne.org/index.php/Startup_Equity_For_Employees))

\- Negotiating compensation? ([http://www.amazon.com/Negotiating-Your-Salary-
Make-Minute/dp...](http://www.amazon.com/Negotiating-Your-Salary-Make-
Minute/dp/0931213207))

\- Establishing a benchmark? (check AngelList)

What are the stock options worth? If you have not tried to value them, then
that's step 1. If you haven't done any research into how to think about
valuing stock options, that's step 0.

This vague question is asked every few months on HN. Search hn.algolia.com to
see answers provided by others. A few of them are worth reading.

Mine aren't the best, but might be worth skimming:

[https://news.ycombinator.com/item?id=7370839](https://news.ycombinator.com/item?id=7370839)

[https://news.ycombinator.com/item?id=8092653](https://news.ycombinator.com/item?id=8092653)

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chasb
Fred Wilson's posts on this are still excellent, and relevant.[0] At Aptible
(S14), we convert equity stakes and benefits to dollar values and offer a few
different equity/salary options to each prospect.

One big question is what your expected role is going to be in the future. 1%
is far too low for a VP- or C-level prospect with experience managing a team.
If the company is already well-funded (i.e. somewhat de-risked), 1% may be
appropriate for a line engineer.

[0] [http://avc.com/2010/11/employee-equity-how-
much/](http://avc.com/2010/11/employee-equity-how-much/)

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gregonicus
Here is a great overview of things to consider:
[http://searchquant.blogspot.com/2011/11/startup-equity-
surve...](http://searchquant.blogspot.com/2011/11/startup-equity-survey-
synopsis-you-are.html)

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Jeremy1026
Too many variables to give a good answer here.

