I’ve been interviewing with a start-up, and I want to negotiate significant equity. I’ve been interviewing for a PM role at a start-up that seems promising and is in the early product-market fit stage. I’ve cleared 3 rounds, and I’m at a stage where I need to start negotiating. I don’t care much about the salary, but I want to negotiate for significant equity in the company.
Any tips here would be appreciated!
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In terms of equity, depending on your seniority, I think 0.5-1% is reasonable; if you come as a head of, or have PM management responsibilities, you can push it to 2%.
If they are talking about monetary value (e.g. 20 000 USDs), although virtual, and you don’t know the value of the company, a reasonable estimate could be amount raised the last funding round x 7
Other things you may want to consider are
- Vesting schedule (usually 4 years with a 1-year cliff)
- Whether you are allowed to keep your vested shares if you leave the company before IPO/acquisition (seems obvious, but I’ve seen exceptions)
- Options structure, including
- Dilution policy
- Strike/exercice price
- Timeframe to exercise after you leave the company
- Whether other option grants are expected as performance or promotion bonuses.
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Here’s the situation you want to avoid. You grind at a startup for a couple years, a lot of your stock options vest. You haven’t been acquired or gone public yet, but you wanna move on to something else. You leave the company, and then you realize that your stock has a provision where your options expire 90 days after leaving the company. You now have 90 days to come up with all the money needed to exercise your options, as well as take a lot of risk by investing in the company. If say you have two years after you leave, you can wait and see how the company does, and hopefully they exit in that time and you just get paid out the difference between your strike price and the sale price.
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The first time I got a letter of intent which never turned to stocks even though I spent 4 yrs in the company. This was early in my career.
The second time I didn’t negotiate equity at all bcos I had a bad taste of the first one - I thought esops were a lie, I only focused on salary. That company had a successful exit, and I didn’t get as much as I deserved. I was the 3rd employee
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Contingent upon your certainty I would likewise check in the event that you can early exercise 83b and get discounted what hasn’t vested if you leave beforehand. I did this and it gives you charge benefits assuming it becomes fluid and stay away from AMT should you, practice early later. Yet, need some trust in the business.
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Under 10%, it gets interesting as there is now sufficient upside for you to take a real gamble on the startup. But unfortunately there is also significant downside as it’s still a risky environment with other alternatives.
10%-20% would be ideal for a startup with seed funding or no fundung
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How do you get them to share the % with you in an honest way? And under 10% is such a vague range? I think you can ask them to convert the shares into $ if the company options were to be converted to a cash buy out. I would start with 1x salary / 4 years in options. You have to eat tax and cost, so factor that in. And also consider your future strategy, such as will you ask for a raise and more options or do you think thats unlikely.
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