Stock options are an excellent benefit — if there is no cost to the employee in the form of reduced salary or benefits. In that situation, the employee will win if the stock price rises above the exercise price once the options are vested. The best strategy for this employee is to negotiate a market-level salary.
Should I negotiate equity in a startup?
Negotiate for equity as if you are an important part of the company’s growth — because you are. That’s a really good reason for you to negotiate for a good equity package. Don’t let anyone convince you that some roles at an early stage startup are less important than others (and thus less deserving of equity).
Where do you get paid more as a startup?
Myth number 4. You get paid more if you live in a high-cost area. Startup compensation is proportionally higher where the cost of living is higher. Silicon Valley and New York City startups pay significantly more than startups in Austin and Washington, D.C.
What happens to preferred stock in a startup?
In the worst case scenario for founders and employees ($2M exit with 2.0x liquidation), common stockholders with 80% ownership will receive $1 million — the same amount as preferred shareholders with 20% stake. It’s important to remember the terms of preferred shares are negotiated between founders and investors.
When to use equity based pay for startups?
Equity-based pay is often used by the founders of young startups who want to grow their businesses but cannot offer big salaries to qualified professionals.
Are there any myths about start up pay?
That research forms the basis for my annual CompStudy survey, as well as the quantitative backbone for my new book, The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup. The research also highlighted four myths about startups and pay. Here’s how they contrast with reality. Myth number 1.
