Posts for Tag: startups

Joining a startup: high salary, no equity OR "startup salary" with equity?

TL;DR: Push for stock options from companies who don't want to give them, and always avoid them from those that offer.

As a potential employee, the negotiation for equity is a great way to gauge the future of a new company.

If you know the signs, it can help you from getting screwed in the long run, potentially saving years of regret while waiting out the vesting period in the hopes the company will make it big.

It generally goes like this:

  • If founders openly offer lots of equity, chances are the company will never make it big. If you settle for equity and a lower-than-market rate, you're probably in for years of hard work that will never reap the vision you were sold when you joined the company.
  • If founders would rather pay a high hourly rate and offer no equity, chances are the company will succeed. This is a sign that there are big things at stake, and for one reason or another, they're holding their options close to their chest.

The founders who promise lots of equity by joining early are usually unintentional scam artists. They offer the world, but these founders are taking a stab in the dark (even though their idea might be good and well-intentioned) and generally have no real plan for execution. They're usually great salespeople who help you buy into the vision, but since they don't have a plan or the connections they need to make the company successful, you should stay away at all costs.

The founders who know what they're doing, have industry connections, and know their ideas will turn into profitable businesses will do as much as they can to maintain their stake. They don't need to offer copious amounts of equity because their idea and vision is enough to sell the typical prospective employee. And they're usually willing to fork over extra cash up front (market rate) to keep you happy.

(Of course, there are exceptions to this rule. But this is generally what I've noticed from my experience in the startup space.)

If you're facing the opportunity to work for companies in both categories, work for the latter who will pay market rate - who doesn't sell you the vision by promising fame and fortune. Opt for the company who knows what you're worth and pays accordingly.

The dance for something worthwhile is never easy. It's sort of like dating. If you go for the easy catch, are they really a catch? When you are forced to relentlessly persue (and then end up achieving) what you want, it's usually worth it.

The fight for equity at a company where equity will be valuable won't be easy to get. But if you keep these principles in mind and are able to fight for a meaningful stake, it's worth so much more than the equity that is freely handed out by companies that have no real future.

Update: There's some great feedback on Hacker News.