I’m getting lot of job calls lately for series A, B startups (30-100 employees). These are AI/ML based enterprise products - payments, monitoring/observability, s/w for sales teams etc. Was curious to know how much money folks made off stock options when you joined series A or B startup, and which was acquired after another 1-2 rounds of funding.
In an acquisition, you’re only worth what someone will pay. I’ve seen acquisitions go for book value, which means your equity isn’t worth much more than what you paid for it, and I’ve seen them go for a 25x multiple of their Series-A value depending on the sector, IP, and profitability of the company.
It also is highly dependent on when you joined and at what level. I would be very wary if the companies calling you are pitching you on the potential payout through an acquisition. Yes, there are those $B unicorns, but they are very few and far between. On average your comp + equity payout at a start-up will break even with what you’d make at a decently paying FAANG. Also, M&A deals can be very fickle and fall through for any reason.
Noting there’s noise in the data, the US BLS reports 50% of businesses fail after five years, which is about the time you’d get a company off the ground and a couple of rounds of funding done on average.
If you’re going to jump into the start-up life, you really gotta believe in the mission and product of the company as well as the team they’ve put together. Think of yourself as an investor, but instead of cutting a multi-million-dollar check, you’re investing your time and effort into the company as an employee.
@MarcoSilva, The positions are for Sr. Product Manager or Principal Product Manager. Is there significant difference in payouts to a Director of Product vs lower levels, in terms of preferences or terms and conditions?
Very different. In my experience, execs tend to get 1-5% of the company if they’re coming in post-Series A/B and individual contributor (non-manager) PMs might get 0.1%-0.5% with Director/VP somewhere in between.
I will defer to others if they have more experience in this area as my knowledge base is limited to a few companies and what I see in my network.
@MarcoSilva, Another factor is share dilution too.
In general, my principle while working for a startup is that my equity is pretend-money. My short-term and long-term plans account for it being worth exactly nothing, and I made my decision to join with that as the assumption.
Some pretty good advice here but I’ll add my two cents. I work in finance orgs so I not only see full cap tables/salary info I also talk shop about this stuff quite frequently.
In general when I’m asked these questions I always caveat with everyone’s experience is different. The nature of startups is that they’re wildly different so there isn’t really a template.
- biggest thing I’m seeing is a sort of lack of understanding as it relates to acquisition. No one can answer that because no one knows what the acquiring price will be or how much dilution has occurred between you joining and the M&A transaction. To give a simple example, you join post A and get .2% fully diluted. They raise a B and C, each diluting the company by 20%. Again, keeping it simple that means you’ve been diluted twice, each time by 20%. You now own approximately .139% of the company, fully diluted. If they’re sold that percentage of the price is approximately how much you’ll receive. Other folks have made great points that it’s not typically all cash, you may be purchasing newco stock as a swap or something like that.
- literally no one knows if the acquiring price will be 50M, 500M, or 5b, so you should be talking in percentages here. If you’re really looking for the equity I really liked the comment about truly believing in the org. I’ve heard it phrased as finding your personal PMF. I’m a bit towards the other comment in that I undervalue my equity quite a bit. Doesn’t enter my calculus as much, just a nice to have.
- your stated range (30-100 employees, series A-B) is actually a huge range. If you’re on the smaller size, not huge raises, and you’re one of the first (read:first two, maybe three) product folks you may be able to get .5% initially. That’s on the higher end though, the only reason I’m even giving that is because of how frothy the market is. I’ve had to rubber stamp offers for tier 2/3 folks with outrageous comp packages in the last six months.
- at the higher end of your range I’d wager you’ll get a better salary and maybe .1-.2% of the company. Always opps for refreshers if you perform though.
- only thing I’ll push back a smidge on that’s in the comments is 5% is a crazy high number for literally any role at the stage you’re talking about. Like smoking gun poaching a rockstar CTO equity levels there. The last three C-suite offers I’ve been a part of were 15-20 year veterans with crazy resumes, CTO, CPO, CMO. No one got more than 3.5%. Typical “Head of”, “VP” folks at these stages are looking at .5-1.5%, maybeeee 2%.
Sorry I can’t be more specific without knowing more. The fact that it sounds like you’re looking at a TPM role with some managerial responsibilities will certainly help your case. The last two technical roles I hired for (TPM, 7 YOE, ML Eng. Manager, 9 YOE, in your stated employee range, got around .2% or less iirc)
I know I’m not a PM or anything but I hope that helped a bit, FWIW I joined the sub like a year ago because I enjoy working with you folks a ton. Super enlightening group of people.
@RichardsonEva, I’m curious, when you refer to the stage of company and C-level getting 3.5% and below, are you referring to Series A and Series B companies? What ranges do you see at companies that are more established (profitable, high YoY growth, PE-backed, etc.)? Even the 3.5% number seems high for those stage companies, but curious what you’ve seen.
I am, primarily. It always helps to think of equity as a reward for taking on risk. So to your point, a company you’re describing that number would be wayyyy lower. The later stage, the more de-risked (both company and the specific department) the less equity you’re going to get for sure. If you’re joining a true rocket ship Below C-suite or mission critical VP level, I’d be ecstatic with a quarter of a point on the equity side.
@RichardsonEva, Thanks for the reply! That lines up with what I was expecting as well. What would you anticipate seeing for C-level at that type of company? Still under a point or around that number?
@Lawrence, Oh man, tough questions! C-suite hires are snowflakes, as corny as it sounds. At one end of the spectrum you’ll have a podunk CFO (like a nuts and bolts accountant) or Chief People Officer getting like .5% and on the other end you’ll have a 30 year industry vet taking the CTO spot at an AI company getting 5% plus. Those are the extreme ends of the spectrum of course (think the Lyft CFO leaving for OpenSeas as an example from a few weeks ago, that dude got bloody paiddddd)
At that C-Suite level a lot of it is optics and positioning, even more so for a rocket ship (again, OpenSeas being a great example). But if you’re a decent run of the mill series C looking to hire a run of the mill critical C-Suite (typically on the technical side) I’d still expect you to fork over 2-3 points or so.
Can’t go too low or you’ll get bottom of the barrel due to switching costs. Sorry I’m not answering too well here, CXO is just so unique. Tons of variables to consider.
I’ve been through a few acquisitions:
- Series A startup - no equity, laid off with one week of compensation per year worked there. My 401k immediately vested
- Established 500-person company - I got to keep job (sort of) with no change in salary and got worse benefits. My 401k immediately vested. I kept my job in the sense that I continued going to the office, but all of my work was given to someone else. So I arrived late, took long lunches, and read books at my desk. I did this so well they said keep up the good work and gave me an office to not work in
- Startup with just friends and family funding - my shares were underwater. I got a 20% raise, an immediate bonus worth about 80% of my original salary, and another 20% of my salary in RSUs that vested over the following three years
- Acquisition of that last company by an bigger company - I kept my job with no change in salary. All of my RSUs (about 20% of my salary) and 401k immediately vested
From my friend: Employee number 30, Series A ML startup, acquired 2 years later, $450k before taxes. He doesn’t know his percentage or the acquisition amount.
This advice is all correct. the percentage matters more than anything. For reference our Series A startup was just acquired (literally days ago) as part of a strategic IPO plan for the acquiring company.
I was like employee 25??? I negotiated a large set of options at hire and also acquired more during the past couple years. All options holders agreed to a 2:1 exchange for fully vested common shares in acquiring company.
This was done to correct the allocation percentages for everyone. I have no idea what my current percentage is but hopeful that it will net a significant sum in the IPO.
As people mentioned though it is rare to get above .5% unless your a founder, extremely needed C-exec or someone like when Google brought in a CEO or Tim Cook at Apple.
I haven’t been in this situation but as a former founder I thought I’d chip in. Here’s an example:
$10,000,000 acquisition 1% equity package 4 year vesting, 1 year cliff
You get zero if they get acquired within the year. If it’s a year after you start you get .0025% (25% of your 1%), then 25% more annually.
So if it’s at year 1 you get $25k, year 2 $50k, year 3 $75k and year 4 $100k.
Most won’t do this because they’re short sighted but I would strongly suggest negotiating for equity over salary and work only with talented people. The later means you have to be talented too. If those two don’t happen then a worthwhile Acquisition or IPO is out of question.
Wowwww!!! That was a super helpful thread. All of you have been of great help in understanding how to negotiate with the employers. Thank you so much. Have a great day.