Start up offer & equity help

LinkedIn eddy163216
May 4 8 Comments

Thinking about joining a start up (already secured Series A funding by a reputable VC) for a SaaS product for Enterprises. I'd be employee #18 and the only employee who has subject matter expert in the industry we are targeting. I am not a developer, I'd be on the business side.

I'm being offered $160k base salary and $100k equity. This feels low but I was told that this is considered half a point ownership. I'm new to start ups as I've worked for bigger companies over the last 10 years. I'm not sure the terms or formulas to consider to ensure the appropriate value.

I'd love help evaluating this offer and questions to ask or consider. Any help would be appreciated.

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TOP 8 Comments
  • Probably not a good offer.

    At this point there’s still only about a 10% chance the company will become liquid at its current valuation or higher.

    So factoring in the risk, you’d only be making $10k, not $100k. (Assume it will go liquid at its current valuation.)

    Now, consider this against how much you’d be making at a large company. Remember, top tech companies have sky high valuations and that’s why startups and smaller companies are moving out of the Bay Area — they just can’t compete in terms of compensation.
    May 4 0
  • Uber f7d83fju
    Ask for fully diluted shares outstanding so you can calculate % if the company. That sounds super low to me
    May 5 0
  • Microsoft unfanged
    I’m assuming $20-25K/year in equity. For 10 YoE and only SME sounds like a bad offer for $160-$180 TC. I would ask for significantly more stock, like 2-3%.

    Also location matters.
    May 5 0
  • Segment / Eng sinkorswim
    If that $100k is per year, then it is not too bad. If it is 4 years, that is kinda risky — series A at $20m post money valuation, I would not call it a promising startup.
    May 4 0
  • LinkedIn eddy163216
    OP
    This is helpful thanks!

    They've said, we'd get refreshers as
    Free each round of investment to help with dilution, but the original offer is $100k for the 4 years, vesting every year.

    Is there a general rule of thumb to follow? Someone told me that the equity should be 2x the salary. Does that sound right?
    May 5 1
    • Look so...it all depends on the stage of the startup and the risk. Equity should be proportional to risk, how much you bring to the table, and inversely proportional to the amount of cash comp you’ll get.

      If the startup does blow up (let’s say goes to $200M, which is 10x its current valuation), there should be a significant upside to you.

      Right now that upside would amount to about $250k/year over the next 4 years. (Keep in kind a maybe 5% chance of that happening, so it would effectively be 12.5k/year.) Essentially — get the “expected value” of your equity.

      Now, think how much you’d make at a bigger company. More? Less? Also consider your position at the startup — bigger title like Director or VP? What would the learning and growth opportunity be like?

      (Just because it makes less sense financially doesn’t mean it makes less sense in the long run. If you play a significant role in a startup, it could be quite valuable to your career.)
      May 5
  • Facebook / Eng cuddle.me
    Stay away from Enterprise for couple of years
    May 4 1

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