Background: I'm a founder who's helped multiple friends negotiate offers with early stage companies.

When you join this early, the main compensation is equity.

To give you a benchmark, most investors pressure founders to never grant more than ~1% of the company to a single employee. In this current environment though, you could probably push for ~1.5%, especially if you take the title of "founding engineer".

When it comes to salary though, you can do three things:

1. Clarify the minimum you'd "happily" take to work with them. This mainly depends on your alternatives and how much you care about this company

2. Understand how much budget they have by asking how many people they want to hire to achieve what milestone when. Note: often people don't have a plan, so you have to resort to no. 1

3. Negotiate a written agreement to raise your salary by X% when the next fundraising goes through

Finally, look for ways to enlarge the pie, such as negotiating getting a 1on1 with the founders every 2 weeks to learn about whichever topic interests you.

Did I forget anything? Happy to share more.

how much are you offering in equity? the issue i had the last time I went through this is that startups seem to expect you to work for 1/4 the pay but receive only single digit percentages for being the first engineer. it just doesn't make sense to take that much of a pay cut unless we're talking 10-25%, and I found nobody that was.

Early stage VC-backed startup compensation is very different from later stage companies or bootstrapped companies. It's very common for founders or early employees to receive a lower salary and receive equity instead.

It’s very much an agreement on compensation. Most of the time we trade salary for equity early on. Looks like you are late in the game so typically expect less. With vesting schedule it’s also a way to make sure you retain talent. I would ask myself what value do I bring to the table? Am I easily replaceable?

Have you had a discussion with the founders?

Generally, startups don't pay market rate, it seems. I've seen offers for $125k - $175k as the base, while bigger tech companies will pay a total compensation of double or even triple that, so the 0.5% needs to make up for that difference. I don't see any startups paying at that "market rate" of big tech, as I've generally seen. Yes, I am focusing on big tech specifically but those that work at startups should be good enough to get into a big tech company anyway.

Consider the large companies with hiring processes intended to try to acquire each employee at the minimum compensation each individual will accept.

I suppose it shouldn't be any surprise if the company (or a manager within the culture of that company) also tries to get the maximum value out of each employee according to what each individual will endure.

Now consider closer to home for HN. Typical pre-seed/seed startups, where the first couple engineering hires might be offered 0.5% to 2% in ISOs, although critical to getting to MVP. While the founders, who started months earlier, get an order of magnitude more equity, and under better terms. Not because that's fair or fosters an environment that deserves much loyalty, but because they're trying to get the employee at the minimum cost they'll accept, even to the employee's disadvantage.

I have no experience of your situation but I think you should perhaps start by negotiating your level and title as an employee as part of the acquisition. I suppose that what's achievable is correlated to the size of your startup.

Whether you join as, say, Director or VP will have a direct consequential impact on your salary (you'll automatically fall within different compensation bands) but also on your standing within the company.

I recently took a position at a small, very young tech consultancy. Our compensation and billing practices are reasonable, but somewhat ad hoc.

Can anyone offer advice or resources:

1. Common compensation structures (salary/bonus/profit sharing/etc splits)

2. Appropriate time billing practices, i.e. billing to the minute vs billing blocks of time

In an early stage startup, there are relatively few "defined" positions.

Wanted: Smart people who will figure out what to do. Pay commensurate with added value.

UpWork

But caveat emptor. The reason people have technical co-founders isn't because they hate having equity in their soon-to-be-unicorn startup; it's because if you're not technical to know exactly what to ask for, how to evaluate it and what is rational in terms of hours/rate, you stand a good chance of losing a lot of money and getting very, very little in return.

If you're interviewing with an early stage (read: pre-series B) startup, the founders believe you're a good fit, and they have seeded a good culture, they will be happy to let you interview every person they've hired so far.

I like to ask these people "Why did you choose this company versus any of the other ones?" and "What were your expectations about [thing I'm uncertain about], and how did your experience differ from that?"

Startups actually have more signal to offer than most big tech companies. However, the onus is on you to scuttlebut, and it's true that the risks of not doing it well are more severe.

Re: compensation, if you are able to demonstrate competence and efficacy, early stage startups will offer you a cash basis comparable to that of big tech. Of course, if your expenses have inflated to the expectation of selling big tech RSUs every year, you should expect a pretty significant "real" cut in annual income unless you walk in to another public company.

I've formed multiple teams of technical Cofounders, starting on the business side. His initial offer seems extraordinarily low and naïve, unless your technical skills are not considered essential by them(at which point you may want to run on this alone). If you have faith in the opportunity and not your fit with it, invest your money, not your time and reputation.

It doesn’t make sense to try to hire devs whose experience is at the largest companies in the world for an early-stage startup position. You’ll have a mismatch not only in risk tolerance but also skills.

The way to go IMO, is to hire someone who’s experience has been startup-focused and offer generous equity to compensate for the fact you can’t pay market rate.

I’ve been on both sides of that negotiating table. It’s ok to say the role won’t match a bigco compensation package, and if that’s you priority you should probably take the bigco offer. An early stage startup is a fundamentally different experience, with pluses and minuses relative to big co’s. If the +’s outweigh the minuses, take the job.

No whining need be involved, on either side :)

(Fwiw, I do think it is important for early stage startups to be even handed and fair on pay, but that doesn’t mean you necessarily have to go toe to toe with the biggest offers)

Some hiring teams just don’t operate in unlimited venture capital land and have tight boundaries in terms of compensation. There’s someone good in anything if you can throw enough money at the problem.

"How to hire low experience, high potential people" who would be also okay with low compensation and great promises for the future?

> I'm curious why you didnt negotiate harder some time into this.

I guess it comes down to being a techy engineer that doesn't know how to even begin to negotiate confrontationally.

Thus my thought that if I ever consider such a role again I'll find a startup employment lawyer to tell me what to do.

Only compensate people a lot after you can tell they are contributing substantially. Otherwise it’s just throwing out money/equity. Also in general you should try to pay people the least amount that keeps them productive, engaged, and on the team. It also works well to hire very skilled people from other countries that pay lower. Speaking as a startup founder.

To offer a different perspective, I was an early engineer at a startup with strong talent that followed this playbook. Things were fine until I realized upon interviewing for fun that I was massively underpaid (2-3x). I was pretty young at the time, and instead of talking with the founders about the gap, gradually grew resentful and left the company.

I’m now on the on the other side of the table, and we pay everyone handsomely but keep the team lean while expecting everyone to operate at a very high level. Not every startup can or should do this, but I feel strongly this is a much better model for retaining talent while balancing cost to the company.

130k is a very reasonable compensation for early-mid career folks in many places. Assuming your a dev, what sector+region are you in?

I'm always fascinated by compensation conversations on HN, because they seem to come from a place of... very high expectations. Don't know how to say that without sounding snarky, that's not my intent.

Curious.

Do regular SWE jobs not pay enough for you? I don't understand the point of this question at all. Join an early stage startup and negotiate for a bunch of equity.

> Joined 4yo as a junior full stack. £40k comp, 0.2% equity. Offered role as good friends with founders. 1st employee.

I understand this was junior, and friends maybe helping someone learn on the job to switch careers, and probably a good and fair deal.

But since this is HN, I want to note that 0.2% equity for a first hire experienced full-stack person would be a terrible deal for the employee.

(I'm calling this out on HN, because I often see founders who think they deserve 70%+ equity, while simultaneously thinking that even a key first hire, who to a large extent could make or break the company, and brings skills founders don't have, deserves only 1%-2%, and only in options they'll probably never be able to liquidate. Just yesterday, I walked away from a recruiter pitching a seed-stage first-hire opportunity. The apparently not-very-technical founder needed a laundry list of technical skills, all over full-stack and iOS and ops, at very experienced hands-on level (they asked for no big company small cogs), as the first hire, to un-fudge the MVP they previously tried to contract-out... for below-market salary, and 0.5% equity. I told the recruiter it's ridiculous for the founder to think they deserve two orders of magnitude more equity than this mythical unicorn first hire. Then I had to clarify that I wasn't negotiating, but that (combined with other concerning signs I was previously open to discussing) this looked like definitely a stereotypical bad startup, of a kind that I wouldn't be allowed to fix. Experienced people should just say no to founders who think the company is their creation and their property, and that first/early hires are only commodity gig workers. I hope post-ZIRP VC will destroy most of the people who got away with this kind of thinking, such as with the Potemkin Village investment scam startups. And that we'll eventually heal all the follow-on negative cultural effects this had on the field.)

just my 2c... they're already not valuing what your bring to the table. what happens after you've worked without pay for 6 months and they start getting traction? I would offer to build the mvp for cash. They can keep their equity if it's so valuable.

Apologies and I don’t mean this as a snarky question, but I have been asked to be a part of a lot of start ups, because you know “I can write an app”.

All of the offers have just had equity is compensation. I’ve dodged the many of bullet, but I definitely would’ve taken cold hard cash.

My advice to a lot of them was "Get funding, I'll come work on the idea". How does HN propose they do that instead?

As an engineer you really have a finite amount of good working years, and accepting startup salary vs big tech compensation is a bigger risk than founders are willing to generally admit.

The first non-founder employees of a company usually end up with the worst deal financially.

Take that into account if you're the technical guy working for the startup.

I think the answer will depend a lot on how the startup was funded. If you get some great seed funding where you can afford to pay the engineers market wages during that startup phase, you might get a completely different answer than if you are trying to bootstrap and either couldn't afford to pay anyone (other than equity) or just a fraction of what they could make elsewhere.

I’ve had a couple offers of 1%. One was my first job which I accepted because I needed a job. The second was a YC backed startup during Covid. The base salary was $100k which I didn’t think was close to acceptable. The salary ranges were recommended by their investors, they showed me the worksheets the VCs gave them.

I just was not confident that in 5, 10 years time my shares would break even with the opportunity cost. And I’m a hardware engineer, so lower opportunity cost than most on HN. I’m not sure how the math ever works out where the startup is a good decision? I guess odds of unicorn valuations are possible for you software people, almost non existent for hardware. Do you factor in anticipated salary raises?

just hire. you will figure it out.

a lot of people i know often wait for the 'perfect' candidate to show up at the door in a halo of divine light. aint gonna happen.

most of the 'A-players' on my team currently were hired less on technical chops and more on un-measurables like 'sincerity', 'attitude'. these same people, now, with the benefit of decades of working together, would not hire themselves as they were when they joined.

in a nutshell: for a startup as early stage as yours, you need people. you will figure out what you need as you go along.