Ask YC: What's a typical stock compensation for joining a series A, 6 months old startup?
I have a job offer from an early stage (6 months old), series A funded startup, consisting of cash and around 0.35% equity (common stock options). The stocks can go up to 0.5% max, with less cash. Some health coverage, no 401K, nothing else actually. I'll be the 8th employee.
Since I have never worked for a startup, I am asking you: what's a "typical" stock offering figure for a early stage startup? And what would that be for a more "established" startup (e.g. Twitter)? I'm trying to understand if their equity offering is below or above market.
This is all very exciting but also confusing because I don't have anything to compare it with in my past experience.
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[ 5.0 ms ] story [ 38.8 ms ] threadIt's pretty typical to have health benefits but no 401k. You should be getting roughly market-rate compensation at a funded startup though; that's why they have funding. If you want big stock grants, you need to take big risks, i.e. work for little or no salary.
Edit: One more thing that I want to add since I've seen many friends get burned or disillusioned by this: you should assume that the only thing you'll get out of a startup is the cash you're paid and the experience of having worked there. Very few early employees cash out with enough that they never have to work again: the ones I know all fall into 3 categories:
1.) They founded the company.
2.) The company went public and became a household name.
3.) They joined early and rose really high, i.e. VP level.
The vast majority of early startup employees don't fit these categories: either their company is acquired in the $40M range and they end up with $3K (true story), or their equity is diluted by multiple successive funding rounds so that they end up owning a tiny fraction of their initial equity stake (also a true story), or the company goes bust and their equity is worth nothing (yeah, that's me). If you go in expecting a job where you'll learn things and hopefully build something cool, then any massive payday is just gravy. If you go in expecting a massive payday, you'll probably be disappointed.
I could get market rate salary with less stock, but I think I am going with a below-market salary and more stocks. About that, I am still trying to decide the right balance...
But there are intangible benefits to taking more equity and less salary. You work harder, which means that you get to work on more interesting things, which opens up more doors in the future. If I were to take a job now (and I'm looking :-)), I'd probably go for more equity and a lower salary as long as it's adequate to cover basic living costs, if only because there're only so many material comforts that one needs...
At one point, I had something like 10K Linuxcare options, when VA Linux and Redhat had recently had huge IPO's and were trading well north of $100. Sigh...
It's not something I think about much though. I was paid well and got a lot of other things out of the experience. However...yeah, it's pretty easy for things to turn sour in a hurry.
At a startup that has received a first round of funding from a top tier VC, a VP could expect something in the 1.5% to 3% range (more for marketing & technical people, average for product and business, less for finance and support). Directors might get between 0.5% to 1.0%. Manager levels half that with technical and marketing people higher in the range, product in the middle and everyone else lower. More for earlier in the product lifecycle (pre-prototype, pre-funding, pre-launch, etc.).
The product is in stealth so I can't disclose anything about it.
My advice is not to buy up the stock by taking less cash at that stage. .15% probably won't justify it.
Just do the math, if you get 0.3% if a company, then they do two or three more round devaluing you, you're at 0.1% at best. How much does the company have to sell for you to see a windfall which is more than 1x your annual salary? a LOT. They basically have to public.
Being a second or third tier hire is a bad place to be. Not enough salary to make it worth it, not enough stock to have a windfall (unless you do ipo which isn't happening a lot right now), and huge hours as if you were a co-founder / first employee.
Basically, it sucks to be an early employee in a startup that does not yet have traction ("product/market fit", in Marc Andreesen's words). You take on most of the risk of a founder yet have nowhere near the reward. And the hours are often founder-like as well, since the company often has no clue what it's doing and so you just keep doing everything until something works or you run out of money. And if you do run out of money (pretty likely), nobody knows or cares about what you did, which can hurt you in your future career.
Being an early employee in a startup with traction can be a very nice place to be, though. Many people underestimate both the chances of success once traction's been achieved (high, even if you're not yet profitable) and the potential market size. And you don't have to put up with the uncertainty and risk that the founders did. Most startups with traction don't get sold for $10-50M that's common for a startup with a product and a couple customers, they get sold for $200M+ or they go public for $5B+.
Here in the UK, for high rate tax payers, a matching pension is worth a bit more than 140% of the stated value. So for an $80k job a 5% matching pension is worth nearly $6k a year.
That's equal to a 0.1% stake in a $60m company, with better certainty of growth. So over five years it might match half a percent stake depending on your appetite for risk.