Hi HNers,
I met a founder recently who has put out an offer for CTO/VP of Engineer title. But the offer is 20k less than my current salary and equity is 5%. The company has received a seed stage funding from a reputed VC and has gone through a incubator already. Is this a good offer?
It's hard to say if it's a good offer without knowing how well you're currently being paid compared to market for the salary, and what you would bring to the company. That said, 5% for a senior executive is pretty typical, I think. And I would expect a seed stage company to pay less in salary for a CTO/VPE than a more established company would for the same sort of role (regardless of titles).<p>You already got some good advice about how to consider equity as part of your total compensation, but that's not what you asked. Hopefully, you've already done some thinking about how much (or little) to value equity yourself. In a vacuum, 5% seems OK for a CTO. If the technology is a critical piece to their business and you have unique expertise in it, you should probably expect more.
Lets just assume you can LIVE WITHOUT the 20k in pay.<p>If you stay in your current job and put that same 20k into the stock market for the next 4 years (80k total) and then do 10% gains for the next ten years... you come out to 200k in your pocket.<p>If the founder your talking to was asking you for 80k would you give it to him? Go ahead get out your checkbook and write him a check for 80 grand right now. See how thats going to make you feel, take a good long hard look at it. Ask yourself what its going to take to GIVE HIM that check, what would he have to tell you or show you or do for you.<p>That cash out of your pocket is REAL, its tangible. The options, don't count them, ever. They are incentive not compensation.
One way to figure it out is to calculate what the 5% is worth. Here's a very rough/inaccurate calculation - that ignores option prices etc - that might give you an idea:<p>Lets say the company's post seed valuation is $3m (random guess). So 5% is $150k. Your shares probably vest for 4 years, so that's ~$40k/year of shares.<p>Given that you're (most likely) getting ordinary stock (not preferred), you should discount that $40k quite heavily.<p>In short: it's probably not a bad offer, but definitely comparable with your current compensation.
Did you mean "reputable VC" or is it one of those many incubator + reputed VC's that are increasingly common out in the wilds?<p>How many engineers would you be VP'ing?<p>How is the rest of the equity distributed?<p>What does the company's growth look like?<p>What is everyone else going to be doing...i.e. is this business type founders looking to outsource building their vision?<p>Good luck.
The equity is very likely to be worth nothing in the long-run. Even if it does become liquid at some point, that's going to be years down the line. I imagine there's a 3+ year vesting schedule attached to it, as well. Are you sure you'll be there that long?<p>Pretend the equity is worth zero and then make your decision.
That sounds fairly typical, yes.<p>Another way to think about it: if you take the job just to get a job and don't particularly believe in the startup, then focus only on the salary. If you have other choices of jobs, but really believe this startup can succeed, then do care about the equity. Which as I said, sounds fair. You can probably get a little bit more with good negotiations (6% - I'm guessing no way to 10%).
As a CTO I would guess something from 4% - 6% some will get more depending on a number of factors. The thing is a CTO could get 10%, but if it is a bad idea or mismanaged then that 10% might be worth $0 after 4 years.
A well managed, great idea might still get you $0 but it might also get you $1,000,000. You never know. You have to way up if you think this idea is something which will be viable.