What should I look out for when joining an early stage startup?

I’ve recently been offered a position with an early stage startup. It’s a SaaS company that’s in a super early stage - currently still being funded by its founders with no outside investments, and only just began beta testing with some users. The team is small with everyone currently working on it on a part-time basis, including its two founders and 1-2 other employees. We haven’t begun negotiating compensation yet, though I was told upfront that as the company is still in its early stages, I’ll only be paid in equity for now. What are some things that I should look out for or take note of when negotiating? And what’s a good percentage I should aim for? I’ve done some research about the vesting process and stuff like that, but I’d really appreciate any and all advice from you guys, who are probably much more experienced than me at this.

Some more background about the role: The product is mostly already built, though there will likely be lots of tweaks after some user testing. I’ll also mainly be involved in the growth marketing side of things, while most of the other people will be focused on the tech.

Thanks!

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Marketing role in a pre-seed stage. I would ask for 5%. If they had seed funding maybe 1-2% would be appropriate but this is high risk for you at this point. They may negotiate lower but 2-4% is a fair range. Ask for shares as well so you get QSBS benefits.

If the founders have a fantastic track record and have built / sold startups before you maybe could accept lower equity but since they don’t have seed funding i’m guessing that is not the case.

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@Lawrence, Thanks for the insights, will read up more on QSBS benefits!

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First, please do due diligence into the tech, market, opportunity, etc.

Find people knowledgeable in the area and ask them what they think of the opportunity. You want to be signing on to something that will have longevity.

Working solely for equity is a pretty big gamble. I would be wary of this. If you decide to move forward, I would ask for a decent chunk of equity to make up for the lack of pay. Personally, I would start at 7.5% and feel out their reaction.

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@NatalieSmith, You mean you’d ask for 7.5% of the total outstanding equity as an new-hire employee? That is crazy high. 7.5% is a lot of equity, but zero salary is a huge ask. No salary is basically a cofounder.

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I would, yeah. Especially with no salary.

OP would be employee number 4 or 5, I don’t think 7.5% is outrageous. And if it is– let them be the ones to tell OP that. Too many people count themselves out by not asking.

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Thanks for sharing. I’ve definitely done my DD on the tech, market etc., but will keep this all in mind as I move forward in the negotiations.

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Why do you want to do this?

The only reason to move forward is if you

  1. Believe they have or will soon have product market fit, and
  2. Believe you single-handedly and with possibly little to no budget can achieve enough traction to gain additional funding (that will require proof of paying customers), or
  3. Are willing to invest your time and risk no payout to gain the experience of being at the helm of the marketing department for an early stage startup (which, admittedly, is pretty cool but not always lucrative.)
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@PriyaVarma, thanks for sharing your thoughts. I’ve done some DD on the product, market etc. and find that it’s a pretty viable opportunity. I’m leaning towards point 3. Intend to launch my own startup sometime in the future so I’m looking to gain experience in building parts of a company up from scratch. I’m well aware that my efforts in this might amount to nothing financially, but I’m confident that the learning experience will be valuable, regardless of success.