
Ask HN: I am a startup employee "getting screwed" by offshore talent - deanmoriarty
I believe I&#x27;m in a unique situation and I&#x27;d like your opinion.
Last year I joined a nice startup based in SV (Palo Alto). I joined right after the company got a seed round from a VC of 3M, with post-money valuation 12M.<p>At the time there was just the founder, and I joined together with 3 other guys (all developers). The deal for me was a bit more than 1% of incentive stock options for a 40% salary cut, with the &quot;very vague&quot; promise that the salary would have been brought to market rate at some point, if things went well.<p>Now, one year later, we&#x27;re doing quite good, we&#x27;re having a bit of traction and in SV there are 3 people in the engineering department (plus some marketing guys): the founder, me and one of the other initial guys.<p>And here comes the interesting part: the rest of the dev team (~10 people) is in a foreign country with cheap cost of labor. The founder, immigrating from Europe a few years ago, has maintained some very good connections with talent there: I&#x27;m telling you, those guys are good and they ask roughly 30% of what a comparable developer would ask here, and they&#x27;re happy with that.<p>I wasn&#x27;t aware of this plan originally, and now whenever I give a hint about the raise (especially lately since we might be close to another round of funding), I get the clear impression that it&#x27;s not going to happen, considering the goldmine of talent abroad that he has found, and that with my raise he could easily buy another developer for a year.<p>Despite liking this job a lot, it is very hard for me to stare at what I&#x27;m losing, especially because the equity is not that great and my technical skills and managing capabilities have improved <i>a lot</i> (seriously, a dramatic improvement) during this past year, so if I changed job I might be able to easily negotiate a 20% (or more) of what I was making before joining the startup, bringing me to an effective current salary cut of more than 50%!<p>What would you do?
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jasonkester
Sounds like you learned all your lessons in one go. Well done.

Never take a pay cut in exchange for lottery tickets. Check. Never take a pay
cut in exchange for a vague promise of returning to your real rate later.
Check. Never let anybody position your market value in the context of what
another developer has negotiated for himself. Check.

You got all that out of the way in the first year. Time to move on to that
better job that pays you in money. Bet you'll never make any of those mistakes
again.

Good luck!

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calcsam
1\. Note that an effective salary cut of 50% means you can _double_ your
salary with a new job.

2\. The single most effective way to get a salary raise is to show how much
you're worth on the market, ie, get an outside offer. Use this tactic
carefully.

3\. My unscientific method is to value stock vesting at Series A companies at
40% of face value due to them being high-risk assets.

Worth to VC = 1% / 4 years vesting = 0.25% / year * $12M = $30k / year.

Worth to you, adjustment for being a high-risk asset: ($30k / year) * 40% =
$12.5k / year.

That's how much your equity is worth, maybe a bit more since you have
additional traction.

~~~
greenyoda
_" That's how much your equity is worth"_

On the other hand, if the company never becomes successful enough to go public
or be bought by a larger company, your equity is worth zero.

As for what to do: I agree with the people who say look for a job somewhere
else. They've already lied to you about bringing your salary up to market
rate, so why should you trust them to look out for your best interests in the
future?

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andymoe
I really don't understand the thinking that %1 equity should have anything to
do with salary especially after the company raised some money. That %1 is
compensation for the risk you took joining a company with a questionable
future... pretty much every new business by the way - even one that raised
three million bucks. The only way you should ever, ever earn less than market
rate is if you are a founder with a founder level stake and control in the
company. Call it 10% or more... and even then it's a bad idea not to pay
founders after raising capital. People who are worried about their bills are
less effective. So yeah, I agree with samt in this thread "Either double down
and ask for a shit-ton more equity, or quit and find a better job. Life is too
short."

edit: You are not getting screwed by offshore talent you have already been
screwed by the founder :)

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samt
Either double down and ask for a shit-ton more equity, or quit and find a
better job. Life is too short.

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argumentum
First, determine what leverage you have.

How essential are you to the startup's success? (how much would it cost to
"replace" you). This might be higher than you think .. they may _need_ a
couple engineers physically in SV.

What % of your equity is vested? With standard terms, I'm guessing 1/4th (so
0.25%), unless there is a cliff longer than a year (which I've never seen).

How likely is the startup to exit in different scenarios: acquihire, bought
for user base, bought for product, or IPO. How likely are each of these
scenarios?

Just remember, this is a pure _business_ decision. Don't worry much about
"loyalty", "promises", "reputation" etc. If you're seriously good, these
things don't matter much. Simply calculate the likelihood and payout for the
possible decisions and then pick.

That's how good founders should make decisions _and_ how good employees should
make decisions. I wouldn't hire people who didn't think this way, or work for
people who didn't.

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switch007
Have you already had a serious discussion about you being unable to stay if
you can't get a fair pay rise?

I think your last paragraph says it all. I would find another job. Good luck!

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stevoo
What i would do ?

I would definitely start looking for a job elsewhere. If he believe that with
the talents he has abroad at the 1/3 of your salary he can do what he wants,
then you will soon be deemed over-paid.

Getting the raise will be extremely hard, unless you are really core to the
company and they will be affected heavily if you leave.

I would start looking for another job that it will make you happy as well.

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tzz
You shouldn't have a problem finding a job at this market but before you
resign, communicate with the founders. Send them email telling them what your
expectation was when you first joined the startup. Since the company is doing
well right now, the right thing to do is to raise your salary to the current
market. If they deny your request, just move on.

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fsk
First, your math is way off. If the company had a valuation of 12M, 1% equity
is $120k. 4 year vesting makes it $30k/year. Also, VCs get preferred shares,
making your equity worth even less than $30k/year.

So, you were an idiot to take a pay cut of $30k or more for this job.

At this point, moving on is your best option. When you get a new job offer,
don't take a counter-offer, just leave.

Echoing the points the other people made, never take a pay cut on the vague
promise they will make it up to you later. That never happens. When you took
the foolish pay cut, you established yourself in their minds as an idiot, and
they will never properly respect you.

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JSeymourATL
Fish or Cut Bait?

Areas to explore: Do you trust the Founder? Do you still buy into his vision?
Does the Founder actively demonstrate that he respects you as a valued
business partner, (even if you are junior)? Are you financially/mentally
prepared to walk?

Before you bail-- suggest a serious one-on-one conversation with the founder.
Get some clarity on where he is on growth plans and compensation. Also, it's
fair to share with him exactly what your expectations are. Manage up, look for
a win-win scenario. Friday afternoon is a perfect time for this conversation.
Suggest you guys go grab a beer together.

~~~
salemh
Would recommend lining up other potential companies/offers before that
conversation, in case it turns into a quick "thank you for your time" and
being let go. Not necessarily as leverage for the raise, but as a contingency
plan.

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payapp
Get an offer letter from another company with fantastic salary, bonus, and
stock options - Google is always hiring good solid engineers, and so is Apple
and 300 other SV companies.

Once you have good offer letter then go to your CEO for a 'man-to-man' talk.

If he has any ounce of courage then he will match the offer or it will be your
last day at work.

Good luck!

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petervandijck
Just as a datapoint: raising their next round might be easier if they have a
CTO in the US. You could be that CTO. But also, look for another job.

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jesusmichael
run

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kjs3
> with the "very vague" promise

So it wasn't in writing. Therefore it didn't exist. Writing has a memory that
promises do not. Everything jasonkester said.

I would merely add that anyone who makes promises, vague or not, but won't
commit them to writing has precisely no intention of keeping them. Full stop.
They might decide to keep them at some point, because they're feeling
magnanimous or something. At the intersection of "make promise" and "refuse to
document", they're telling you "I want the flexibility to not keep my word
without consequence and I'm betting you're gullible enough to believe me". And
if they say something like "we're doing this on trust and trust is important
to our success" or "there's no need to bring a lawyer into this", you are
rapidly approaching a 100% guarantee of getting screwed.

