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Ask HN: How to negotiate equity/compensation as first hire?

6 points by vonklaus ↗ HN
We just got into an accelerator and I have been with the company for 3-4 months. The company pivoted from b2c to b2b and I helped with product UX, biz dev and some of the website setup stuff.

There are 2 founders with 50/50 equity split. The company just sold 6% to the accelerator.

I have a pretty broad set of skills. I can develop at a jr level, quite good at marketing, accel at strategy and biz dev., and played a non-trivial part in getting into the accelerator as I am pretty good at translating complicated financial and technical concepts into succinct easily understood points.

This helped convince investors that we were providing something valuable, and they could grok these concepts much easier.

The company doesn't have much money ~25k in the bank.

I am asking for:

650 a week salary for next 4 months during accelerator.

new macbook ~1600, I broke mine in NY during the meetings. About $600 of wages owed to me I have agreed to give up so basically this is about $1000 of company money/bonus for me to use. I am going to use it to buy a new macbook to do my job.

80 dollars of software (adobe CS for 4 months)

1% equity award, retroactive 1 year cliff from start date.

1.5% of next funding roud capped at a normal salary ~50-60k. This is to get an actual salary when it is possible for them/the company to pay me.

===============

Is this too much or too little. I don't knoiw exactly how to value myself and I tend to undervalue some of my skills and maybe over value others. I tried to be objective above.

Help would be appreciated. While I have read a bunch of posts, there really is nothing standard about startup equity/compensation. I have a decent skillset, however the founders have much better pedigree than I do. They are pretty technical and have a lot of knowledge about the space. One is an engineer one is finance but also technical. We are in fintech space. I have a very broad skillset, with decent understanding of all of this, not to the depths the founders do though.

24 comments

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sharemywin
I would say you need a normal salary no matter what after accelerator and if they want pay less it needs to be replaced with more equity. and since you came in earlier than the accelerator it's needs to be at that valuation.
vonklaus
Not 100% sure what you mean. I really want a normal salary now, but they don't have the cash. Post-accelerator I would like/expect a real salary. I don't know if 1% is a lot of equity or not especially because of how dilution works. If I understand you correctly I agree.
sharemywin
If the accelerator is getting 6% for 25k than the company would be valued at 416k pre-money. If you should be getting 5k per month, I would want .25% per 1k I'm not being paid. So, if 4 mo's go by and your getting 2k/mo, I would think you should get .75(3k short per month)*4 mos = 3%. Make sure you get it in writing even if an email(better than nothing). Other than a down round you should always make out better money-wise with each round. And this should be equity not options.(BS opinion not legal advice.)
vonklaus
Makes sense, I understand now, and that seems pretty reasonable. Thanks.
rmc
> I really want a normal salary now, but they don't have the cash.

That's fine. If they don't have the cash, then all they can offer is equity.

> I don't know if 1% is a lot of equity

It's not. Why do each of the founders get about fifty times more equity than you? Are they doing fifty times the amount of work? Are they taking on fifty times the amount of risk? etc.

ramtatatam
Not being an expert in start-ups (although involved in three) I would say you do not measure contribution purely by amount of work. Idea, market research, amount of risk taken, amount of capital raised / invested... Unfortunately "bricks and mortars" work is somewhere at the end of the list - you can get somebody else to do the work, which does not apply to other points.
sharemywin
Alot goes to supply and demand though too. And there aren't a lot of people willing to work for free full-time for long periods, except co-founders.
ramtatatam
Of course, the author of this post does not want to work for free. And I just made the point that spending hours (on whatever) is not the only way to measure contribution.
patio11
You appear to this disinterested observer to be a co-founder of the company. If you had not told me your ask, I would have told you to ask for a third.

Having seen your ask: you should ask for a third.

vonklaus
Thanks. It means a lot coming from somebody who is basically a hiring expert. It is just super weird valuing yourself. I know I am really good at communicating, thiunking about biz dev and sales and execution. However, I am ostensibly just a nobody and the founders (although they don't treat me poorly or anything) have much better credentials being Ivy league and technical, financial and business oriented.

I also didn't add this, but the laptop is being given as a bonus. I told them they could subtract the $600 of pay from the accelerator/pitching from this past weekend and that I needed a new machine.

I think a third is a bit much, but I don't think it is unreasonable to ask for a bit more and for a salary if/when it is possible for it to be paid.

I just have a net worth of -6,000 right now. So, it is hard to bootstrap with limited upside. I want to help them raise a 1m round, get my salary retroactively paid, help them hire a few people to execute and then amicably depart.

Thanks a lot for the insight.

sharemywin
If you aren't being paid, and they haven't offered you any kind of equity, you are being taken advantage of.
vonklaus
Offer was 2.5% with 1 year retroactive cliff (so dated 3 months ago) and a 4 year vesting schedule
rmc
That's peanuts for someone who's taking just as much risk, and working as hard as a "founder"
sharemywin
with no pay? That should be 5-10x that. They sound way to greedy with equity to find the kind of talent to create public company. And that's the only time equity pays for anybody but the founders. (BS opinion, not legal advice)
patio11
However, I am ostensibly just a nobody and the founders (although they don't treat me poorly or anything) have much better credentials being Ivy league and technical, financial and business oriented.

Did their Ivy league pedigree and technical, financial, and business orientation let them raise enough money to pay you a market salary? No? Then their pedigree is worth precisely what yours is.

If you feel really strongly that you want to be an employee and not a co-founder, ask for a market salary and let them, as a courtesy, pay it with N% cash until they raise a round and (100-N)% on a promissory note due as soon as they raise > $50k worth of funding.

vonklaus
> Did their Ivy league and technical, financial, and business orientation let them raise enough money to pay you a market salary? No? Then their pedigree is worth precisely what yours is.

I wouldn't have thought about it this way, but when put like this it is hard not to. I need to think about it more, but this is a great point. Thanks for your time. Means a lot.

sharemywin
If your working with them shoulder to shoulder and your invaluable, it's hard not see it that way.
rmc
You sound like a founder of the company.
vonklaus
I actually value having a cofounder title a lot. I am not sure how big of an ask that is, but having the title and recommendations from both the other founders would give me a better chance of raising for my own inc in 6 months, so I would shave some points off the equity for that. It probably doesn't make sense, but I have been thinking a lot about it
rmc
It's not a big ask. You are doing the work of a founder, you are taking on the risks of a founder, you are getting the salary of a founder (i.e. sweet eff all). You're either a founder, or they pay you market wages for market conditions, or they're screwing you.
vonklaus
Im having this conversation in 5 minutes. This was very helpful.
dwwoelfel
How did it go?
vonklaus
I am still negotiating. We are all in dif places.

Currently I am hoping for:

Until next round:

650 cash a week.

1500 allocation for new macbook.

Deferred compensation:

Basically a lump sum backpay of the difference of the 650(pay from above) and 1150(60k annual salary) multiplied by the amount of time they can't pay. This should be about 4 months. Somewhere into month 6 we would possibly die without funding or rev anyway.

Then the equity offered was 2.5% 1 year cliff 4year vest. I asked for like 1.4% of the next raise instead. Capped at like 20k.

Then we would renogotiate. For continued employment.

Small things like ~100$ of software.

Does this make sense?