Ask HN: What pay to target when joining a startup?

[server_man3000]

Can anyone recommend advice to a senior engineer at a big tech company who is looking to join a startup as employee no. 3?

Let's assume the company is just kicking off and has secured $600k - $1m of initial funding. How do you think about pay? What are good questions to ask before committing?

I'm only used to negotiating with a large corporation that is both public and willing to show actual money.

[akomtu]

Let's say the big tech company pays you 350k/year and the startup offers you 150k/year. If you were to keep working where you are, but invest 200k/year into this startup, how much would they owe you? If they've just sold 40% of their company for 800k, your 200k buys 10%. And keep in mind that investors get special terms that protect their investments, so the founders can't just print more shares to dilute the investors' stake. With this in mind, if they offer you 1% of common stock vested over 4 years with no contract to protect your share, they have a very low esteem of your math skills.

[simantel → akomtu]

Joining a company at that stage as a non-founder is never going to make financial sense. They won't give you meaningful equity, but also can't afford to pay market rate salaries.

The only reasons to do it are to learn from the founders or as a way to grow with the company into a manager/director much more quickly than you could at a bigger company.

[akg_67 → akomtu]

+1 Agree with everything you mentioned. Also, make sure you don't get a long vesting period. $200K a year in equity based on latest round valuation, vesting monthly. Just think of it as receiving comp as $200K/12 but in equity.

As a #3 employee, assuming #1 and #2 are founders, you are as close to founding team member as possible and you should be compensated similar to founder than a #30 employee.

Definitely say NO to 1% of common.

[janalsncm]

Ask to see all of their financials. If they have $1M, how much runway do they have? What are the other members getting paid? How close is the company to getting revenue? How much other fundraising have they done?

[server_man3000 → janalsncm]

Is it typical to ask to see what others are getting paid?

[JimtheCoder → server_man3000]

I think the bigger issue would be if they actually answer...

[kevincox → JimtheCoder]

Why is that an issue?

[forgotmysn → janalsncm]

most start-ups I've worked for have been transparent about operating budgets and runway, but I can't think of any that would open up the books to a random employee, let alone a candidate.

[catchnear4321]

always keep in mind that startups are a different kind of stupid from large corporations.

[5mv2]

Background: I'm a founder who's helped multiple friends negotiate offers with early stage companies.

When you join this early, the main compensation is equity.

To give you a benchmark, most investors pressure founders to never grant more than ~1% of the company to a single employee. In this current environment though, you could probably push for ~1.5%, especially if you take the title of "founding engineer".

When it comes to salary though, you can do three things:

1. Clarify the minimum you'd "happily" take to work with them. This mainly depends on your alternatives and how much you care about this company

2. Understand how much budget they have by asking how many people they want to hire to achieve what milestone when. Note: often people don't have a plan, so you have to resort to no. 1

3. Negotiate a written agreement to raise your salary by X% when the next fundraising goes through

Finally, look for ways to enlarge the pie, such as negotiating getting a 1on1 with the founders every 2 weeks to learn about whichever topic interests you.

Did I forget anything? Happy to share more.

[m-ee → 5mv2]

I’ve had a couple offers of 1%. One was my first job which I accepted because I needed a job. The second was a YC backed startup during Covid. The base salary was $100k which I didn’t think was close to acceptable. The salary ranges were recommended by their investors, they showed me the worksheets the VCs gave them.

I just was not confident that in 5, 10 years time my shares would break even with the opportunity cost. And I’m a hardware engineer, so lower opportunity cost than most on HN. I’m not sure how the math ever works out where the startup is a good decision? I guess odds of unicorn valuations are possible for you software people, almost non existent for hardware. Do you factor in anticipated salary raises?

[faangiq → 5mv2]

> negotiating getting a 1on1 with the founders

just lol

[seattle_spring]

$125k -$150k with that amount of funding imo. 1-2% equity.

[I_am_tiberius → seattle_spring]

Equity is heavily impacted by the state of revenue imo.

[seattle_spring → I_am_tiberius]

If you’re joining as a founding engineer, it’s pretty safe to assume that the “state of revenue” is “zero.”

[I_am_tiberius → seattle_spring]

In my case the business is 3 years old and we're still just the founding team. However, revenue is on a level where we can finance our lives. It would really need to be a heavy hitter for our first employee to get more than 2% equity. I think that's not so unusual, it's just unusual in Silicon Valley.

[helsontaveras18 → seattle_spring]

^ this is typical for US founding engineer

[server_man3000 → seattle_spring]

Only 1-2% for employee no 3?

[seattle_spring → server_man3000]

Sadly, yes. Unless you're an actual founder, this is about as good as it typically gets.