Assume you’re a recent graduate or other new entrant to the startup world. You’ve been fortunate enough to identify a company interested in hiring you, in a market that you want to work in (something I wrote about previously here). You’ve reached the point where you are discussing an offer letter, and suddenly you realize that you have no idea what you should be optimizing for. Fortunately, there are a few areas that tend to get the most attention when evaluating offer letters:
As a junior employee at an early stage company, you will not be getting rich off your equity compensation. Any grants you receive should be viewed more as a lottery ticket than a quantifiable part of the compensation package. Beyond negotiating for a standard options grant in the first place, you shouldn’t spend time negotiating numbers or terms of a grant.
(For more info on how to approach options as an employee, David Weekly has an incredibly valuable writeup here)
Titles at startups bear little relationship to those at other organizations, large or small. A director or manager at one startup might be doing the work of someone far more senior, while other companies hand out C-suite and VP titles like candy. Objectively, neither extreme matters. If you make a career move from one startup to another, your new company will be much more interested in how you spent your time and what results you achieved. As an example, at Onswipe my business cards called me the “Director of Strategic Partnerships”, a vaguely biz-dev related title. In actuality, I spent most of my time working on product and operations, including coordinating with the engineering team and lending a hand on hiring and organizational processes. When I was ready to make a move over to Taykey, guess what carried more weight, my title or my actual experience?
My only specific advice is to stay away from the obnoxiously trendy titles that are sometimes popular in startups. If your offered title has the words “ninja”, “happiness”, or “rockstar” in it, I would sincerely suggest picking something slightly more traditional. Your title shouldn’t ever provoke a negative reaction in people you might meet, and a trendy or irreverent title can often do this.
This leaves compensation as the toughest part of the equation. When you aren’t signing up for a standard 40 year linear trajectory of raises, the salary question becomes much more daunting. As a result, I like to think of compensation in terms of plateaus. In the first 10-12 years of your career, there are three main plateaus to be considered. These plateaus can be tremendously useful in how you think about and approach a salary negotiation.
Survival- This is the “crappy apartment and lots of Ramen” stage, one that is almost unavoidable if you are truly interested in pursuing a career in early stage startups. This is probably your first year of employment, and your first offer letter will often have you taking this type of salary. The negotiation here is simple: figure out what you absolutely need to survive wherever your job is located, and argue (quite reasonably) that you can’t accept anything less. In New York or San Francisco, this number is obviously different than in Raleigh or Seattle. Do a reasonable calculation of living expenses in your city, and make sure you don’t accept anything below that threshold.
Living Comfortably- – This will be the threshold reached after you have clearly established your value in a startup. It might take the form of a promotion (from an associate type role into officially owning a specific business function), or a move to another company. In most cases, you will have gravitated into a specific job function, usually delineated along lines like product, biz dev, or marketing (with plenty of other options depending on the company type). At this career stage, you should be making enough to live in a healthy and sustainable fashion for a period of several years. You shouldn’t be adding debt (and should be paying down any existing loans). You should have enough “extra” cash to do things like travel, eat out with friends, and generally enjoy life. I won’t get into specific financial planning advice here, but the general idea is to develop a reasonably comfortable and sustainable lifestyle at this stage.
Building Wealth- This is an interesting plateau, in the sense that reaching this “mid career” salary stage in a startup is much more age agnostic than in traditional corporations. This is where you see the non-linearity of startup careers being magnified into extremes. Some people are able to leverage an early career success (such as working with a company that goes through a successful exit) and turn it into a lucrative senior role at another startup. Others are able to capitalize on a strong personal brand to punch above their weight, and earn a senior role early in their career. However you arrive there, this is the point at which total compensation (equity + salary) becomes much more complex.
Rather than scrapping and fighting for every incremental raise (the “linear” model), look to make aggressive moves that put you in a strong position to progress from one plateau to another as quickly as possible.