My experience: 3 yoe as SWE ~220k total comp annually (base + bonus + equity at current stock price) Company: In Bay Area Private 100-200 employees Series D funding High chance of successful exit, but no idea when Growing quickly, a lot of upside in my opinion Really like product and team, not a fan of location Offer after some negotiation: Base: 145k base Bonus: 10% of base Equity: .05% of company, which is about 35k/year at current valuation No signing bonus If valuation 2x, valuation is close to my current comp. If 3x, valuation is 50% more than current comp. Total comp of offer 195k at current valuation, but 160k without equity, which is what my take home pretax income will be until company exits. Thoughts?
You can decide if it’s good based on current situation. I would focus on how good the product is, YOY growth until it exist (will it be 2, 5 billion?). Your patience would be tested, see if there is a 7 year clause, meaning if things don’t work out and you quit, how much time do you have to exercise options - 90 days or 7 years?
Never count equity
does fitbit pay well?
What about learning opportunity and career advancement? Imo the offer isn’t that great financially unless you really think the company will continue to grow rapidly. You can likely get a better offer from a larger startup that is definitely going places (Lyft, stripe, uber, Airbnb, etc)
Team, product, and work environment are all top notch from what I’ve seen. I think the company will grow but difficult to say whether enough to be worth the risk.
My opinion: a smart person never looks at equity. Look at equity as winning a lottery. Most of the time your share will be diluted to nothing by the time the company exists and even go IPO. Then you are talking about another 5-6 years. I wouldn’t mind not having the equity. What is the vesting schedule? Is it spread over four years? But if you are in SF, 145 base is too low, it’s hard for saving. I would fight for better base with some equity. I would never stay in a startup for too long. Move to FAANG and make $$$$. Consider joining a startup as buying a stock at a low price. The stock either explodes, half-ass, or completely shit.
Smart person
Thanks. I’m obviously not experienced with this and don’t really know how much shares get diluted, but that’s an important point to keep in mind. The vesting schedule is 4 years. I’ve tried increasing the base but they wouldn’t budge much more - the base I asked for and would need to match my current comp is in their staff eng band.
"Company will have to 3-4x its current valuation for equity to match my current total comp" - Umm I think you answered your question right there. If a 3-4x from that late stage only gets you back where you started you are taking a horrible sucker deal. A very good outcome (3-4x) should at least net you plus 30-50% from where you are now. Redo math and adjust ask accordingly. Why the hell would you take a huge risk just to break even.
I updated the post with new, more accurate numbers after I realized I wasn’t using the latest numbers. 2x gets me close to current company and 3x gets me 50% higher than current comp. 4x gets me 2x my current comp.
Somewhat better. I think probability of a 3-4x outcome is still probably pretty low. Even 2x is probably... 15-30% chance at this stage unless company is just on fire. And that's just to get back to where you started. And so much of that is deferred so should be discounted further, and subject to other cap table risk factors (dilution is a path dependent variable on the way to that outcome). Remember that a 0.2-0.5x outcome is always a big probability these days with inflated VC valuations and then you get nothing. I would insist on not taking more than a 10-15% cut in liquid comp if I were you, so maybe 190-200k cash comp plus the equity.
"High chance of successful exit, but no idea when Growing quickly" Said every startup founder ever when trying to recruit candidates. You also don't know if their customer LTV is higher than their CAC. If not, the company is still earning negative profits on every new customer as it grows. IMO you'd be a sucker to take this, even if the equity at current valuation minus cost of buying your shares at strike price matched your current total cash comp at Fitbit. The reason is simple: series D IPO is far from guaranteed and you are already earning public stock in cash at Fitbit. There's also no guarantee that the company's valuation will grow with its user base, or that your equity can ever be converted to cash. (For example, Wealthfront's valuation dropped by $200M in its last funding round even as the user base continued to grow.) The only real compensation upgrade you could make at this stage is to join another public tech company, or a serious pre IPO company like Uber, Airbnb, Stripe or Lyft (obviously for higher comp). No one at a public tech company should ever count non-public equity as compensation, unless it's one of the companies named above (and maybe a handful of others that are almost guaranteed to IPO).
The growing quickly comment came from fact that their revenue (tens of millions of dollars) more than doubled in last year. I looked up Exit rates by stage, and was surprised that series d is so low (22%). That’s much higher risk than I thought. Good point that I’ve been thinking of best case of increase of valuation relative to user growth but that is not necessarily the case. Thanks for the advice.
No problem. I spent a year of my career working for startups because I had no better option, and am surprised how many people continue to do so. I'd only do it if I'd fully paid off property in the Bay and compensation were no longer as much of a concern (which is my eventual goal)
Just look at the history of cofounder, work culture. If those things are not good, don’t go for it. If cofounder and exec management has got a good history making company either acquired or IPO, I would suggest its worth trying.
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How old is the company and what is the valuation? Would be pretty great a Series B/C, but it sounds like you’re betting when you need 4x for a comp match.
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