In terms of compensation, a new CTO typically sees about $200K and 3% equity. Equity is non-cash compensation that represents partial ownership in a company. 2. Y Combinator’s Sam Altman wrote a convincing piece on offering more startup equity to employees, which spurred a healthy debate on the matter. This is tough to answer without knowing your background and without knowing how much the current company might be worth. The plan that's the best fit depends on each corporation's circumstances and its objectives. Compensation – No matter how employees are compensated with equity, the value of stock options can play an important role in a company’s total compensation package. Startup equity incentive plans typically allow for grants of both flavors, with the specific situation determining which one is used. This is why startups often offer equity instead of salary to their first hires. For example, an ex- Chief Marketing Officer from a different industry to the startup might be an invaluable General Advisor. Attorney Mary Russell counsels individuals on startup equity, including founders on their personal interests and executives and key contributors on offer negotiation, compensation design and acquisition terms. As a rule of thumb a non-founder CEO joining an early stage startup (that has been running less than a year) would receive 7-10% equity. Equity compensation for startup employees is a recruitment strategy where a percentage of company equity is offered as part of the employee remuneration package. Cash isn’t a currency that early-stage startups want to use for advisor compensation. The bottom line is simply to treat equity for what it is: a lottery ticket in a constantly changing business environment, littered with the corpses of glittering startup opportunities. Please see this FAQ about her services or contact her at (650) 326-3412 or at info@stockoptioncounsel.com.. Here's a quick look at the five most common types of equity compensation plans. Answers to these questions I will provide in the next blog post, “What startup equity compensation means for developers: Part II." That means equity will be the focus of the conversation. How to Negotiate Equity Compensation. Explore by role, location, skill, or market. So people ask me “How many shares should I ask for or expect when I join a startup today?” It is seldom a complete replacement of the cash component, rather an addition to the base salary in cash. 15 Oct 2019 • By Dan Eyman • In Start Ups, Stock Options. Vesting Period. The Holloway Guide to Equity Compensation… This compensation offers the potential for a big payout, but it's also much riskier and tax-complex than earning a salary. If you're looking for more equity, then you can counter with more equity and possibly be more flexible on cash comp. Moreover, giving out equity also works as an incentive. by Martin Zwilling. Founders’Pie Conventional Wisdom •Count the number of founders •Divide the number of founders into 100 The equity is typically distributed among the early founders, financial supporters and sometimes employees who join the startup in its earliest stages. General Guidelines for Forms. Some CTOs may be in a place and have an interest where they are willing to trade salary for equity, some won’t be. Equity is the great compensation equalizer in startup companies—the bridge between an executive’s market value and the company’s cash constraints. That means you and all your current and future colleagues will receive equity out of this pool. The equity portion of a startup employee’s compensation must legally be structured so that, if the options were exercised immediately, they would have a fair market value of $0. Facebook Twitter. Startup salary and equity data for thousands of startup jobs. Offering equity compensation can be especially valuable for small companies and startups because it offers employees a potential return in addition to their salaries. With your list of key positions in hand, look into salaries and equity norms for those roles. Cash vs. Stock . There is a tradeoff between these. 5. For a cash-strapped startup, issuing stock or a warrant instead of paying cash is an easy way to preserve limited cash reserves while still growing the business. In a post on his SoCal CTO blog, Tony Karrer, Founder and CTO of TechEmpower, Founder and CTO of Aggregage and organizer of the LA CTO Forum and Startup Specialist Network, shares stories based on his experience working with over 30 startups over the past 15 years.. Finding and retaining top talent is an everlasting problem all start-ups must go through. Originally published February 12, 2014. You want it because it: Aligns your incentives. Equity compensation helps to attract and keep employees in a startup environment because these companies generally are short of the initial funds to get superior employees. Cash, Equity or Both. Stage of Startup. Step 3. Equity Compensation Rules of thumb, guidelines, conventional wisdom & other considerations Frank Demmler. Equity compensation plans are a valuable and versatile tool for many corporations, from startups to established blue-chips. SHARES. However, he says 0.5 percent and 1 percent is a good range to consider, vested over one to two years. Founders’Pie Getting started correctly is critical! I was at $220K + >=3% at my last two startups. Lewis Hower connects Silicon Valley Bank and VC/startup communities as a Managing Director with SVB Startup Banking. Research competitive startup salaries and compensation. To help you gauge “market rate” for your equity compensation, there are some free benchmarking resources. Don’t let your startup negotiation partner monetize it - ask for your full market value in cash … Complete Guide to Startup Equity Compensation. I’ve decided to continue working as a consultant at Personal Capital because I’m having a lot of fun, learning a lot about the financial tech startup world, meeting new people, and feel like I’m making a difference in helping build their brand online through content. Startup Equity as Compensation is a Long-Term Bet. Make sure they are actually […] Startup finance can be incredibly tricky, especially when it comes to compensating co-founders and employees, as most startups usually don’t start their journey with money to spend. Salary and equity comprise the compensation package. “The only time that you should be willing to take all equity and no cash compensation is at the very earliest stage of a startup, and only if you are positioned as a founder with similar rights as the other founders, including those putting up the initial funding,” Carney says. Having equity, in short, means employees are directly invested in the company’s future. At a typical venture-backed startup, the employee equity pool tends to fall somewhere between 10-20% of the total shares outstanding. 250. Background reading: Founder Compensation: Cash, Equity, Liquidity Fatal Errors in Early Startup Hiring Early Hires: Options or Stock Given how deeply involved we are with early-stage startups hiring their first key employees, I figured it would be helpful to outline a few key principles to help entrepreneurs navigate the topic. A non-founding CEO of early stage company equity ranges from 5% - 10% typically. If you want to get notified when Part II will be out, you can subscribe to my newsletter and get my top-15 tips on saving more … Startup equity is a lottery ticket—not a replacement for salary. If you make the company better, your equity is worth more. Equity is so dominant as the form of compensation that I don’t see a reason to cover cash-based compensation. As a general matter, you should not make substantive changes to any of the forms included in the Startup Forms Library without checking with your legal counsel. 4. 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