How do I negotiate compensation with a mid-stage startup?

May 10, 2014 7:26 PM

I currently have two job offers: one from a startup and one from a large corporation. I'm strongly considering taking the position with the startup and have negotiated on compensation already, but would like to ask for another increase. Please help me navigate this!

Startup:
- The total package is less than what I currently make and the startup knows my current compensation but said that they most likely wouldn't be able to match my current comp of roughly $74K
- Originally offered at a base of $60K; I asked if they could match my current comp and they came back with $65K base with a $3K signing bonus, so total comp of $68K
- If GlassDoor salary histories are accurate, there are/were people in this role currently making $44K - $50K, though my guess is that the average is $50K - $60K
- Average compensation for this role in the general market is much higher, at around $85 - $100K for base
- Startup is mid-stage, past proof of concept, and well-funded
- No equity grants, though I would be eligible for options
- Health, vision, dental benefits are good; 401K plan is in place, but matching is virtually nonexistent
- I can tell that they really like me as a candidate and that I am by and far their top choice; this was also explicitly stated to me as such

Corporation:
- Base salary of $82.5K with a $12K relocation bonus and $5K signing bonus, so total is just shy of six figures.. which is very compelling, not going to lie
- Good benefits with 401K matching at 50 cents to the dollar, up to 6% of salary
- Not as excited for this position as I am for the startup

Questions:
- I'd like to receive a base comp of $70K and $5K signing from the startup and leverage the fact that I have the other offer to justify the second increase -- how do I go about wording that?
- Is it even kosher to ask for an increase in comp for a second time?
- What about asking for $75K base and forgoing the $3K signing bonus?
- Am I asking for too much right now, given that they offered $60K first?
- When the startup said they wouldn't be able to match my current comp, could they just be saying that to not pay me as much? If it's actually true and don't have $70-75k budgeted for the role, I don't want to come off as too aggressive by actually asking for that much and fear they might rescind the offer

HALP!

posted by 6spd to Work & Money (16 answers total)

When the startup said they wouldn't be able to match my current comp, could they just be saying that to not pay me as much?

Well, of course. We're talking about less than $15k per year, which is pennies to any company that isn't run out of a garage.

There is no "asking for too much." All they can do is not give it to you. Since you have another offer, that doesn't seem like much of a problem. You're in the driver's seat. Personally, I think start-ups should always be offering *more* than established companies, to compensate for the instability and 10,000 minor annoyances inherent in working at a start-up. I've found start-ups who plead "We're poor now, but just wait til we hit it big!" to inevitably be awful places run by awful, dishonest people, but every situation is different.
posted by drjimmy11 at 7:34 PM on May 10, 2014 [5 favorites]

Oh and maybe a dumb question but, did you tell them about the other offer and how much it's for? That's the best leverage you have. How much you got paid before ultimately isn't relevant, except as a flimsy pretext to lowball you. How much you can make by working for someone else besides them is very very relevant.
posted by drjimmy11 at 7:37 PM on May 10, 2014 [2 favorites]

when the in house recruiter goes to ask for a pay exception for you, she'll need to have a justification other than "6spd wants more money." The competing offer is the most relevant possible data. If you haven't already told them about the competing offer, then definitely tell them - that is also a good entry to the "hey let's renegotiate this" conversation. It's new information.
posted by fingersandtoes at 7:53 PM on May 10, 2014

Response by poster: I received the competing offer just yesterday and the startup knows I've been waiting to hear back from them. They don't know about the competing offer yet.

My plan is to let them know about the offer on Monday and ask for an increase based on its package, but I'm just trying to gauge how much more I can get.

As far as I can tell, the startup has a good culture and I think I'd really learn a lot and enjoy the job.

Should I just give them the compensation details from the other offer and see what they come back with? Or do I want to ask for a specific amount?
posted by 6spd at 8:02 PM on May 10, 2014

They're mid-stage, offering you WELL below market rate, and not even willing to give you the basically free-to-them token of equity? They don't value you or your role and will continue not to if you accept the position.
posted by animalrainbow at 8:15 PM on May 10, 2014 [12 favorites]

The negotiating strategy I have read about and like is to just say only "it's not enough," and wait silently for them to respond. A 25% dip from the bottom end of the industry standard is a lot, especially if they aren't offering equity. The cash difference is no dent in the bottom line of a company that is "well funded."

As for the corporation, keep in mind that the "nearly six figures" only applies to the first year, and most of that extra is for relocation, which you wouldn't have to worry about if you weren't working for them.

Lastly, consider the possibililty that you may be the startup's "first choice" because their previous first choice's have already rejected them based on their low offer.

Based on the number you've provided, I don't see any reason for you to take a pay cut. Also note that the corporation is miraculously! offering exactly 10% over your current pay. Had you told them previously what you were making?
posted by rhizome at 8:17 PM on May 10, 2014

I couldn't agree more with Drjimmy's comment - startups should be offering you MORE than the established rate because of the possibility they'll go poof and because they aren't matching your 401k (and other startuppy things.)

If the startup is offering you stock options, be very careful to find out what the exit plan is, what your strike price is, and how long you have to be with the company before your options vest. If the founder has successfully launched and sold other startups before, that's a great sign. When I've been offered options as part of my compensation package before I tend to think of it as a nice bonus on top if it works out- but I really don't count on it coming through in time to pay the mortgage.

I don't like that they're offering you pay so far below market, that sets off all kinds of warning bells for me. I would certainly force them to match the Corporation Inc offer.
posted by data hound at 10:25 PM on May 10, 2014 [1 favorite]

Response by poster: I will say that the position is a large jump in terms of responsibilities and I'd be learning a heck lot.

I most certainly would not be able to get hired for the same position in the broader market with my qualifications.

So on that note alone, I'm really interested in the opportunity because it gets me into the tech space and it's a fairly reputable startup. And that's also why I'm not so concerned about how much below market it pays.

That said, I do want to get more compensation, period.
posted by 6spd at 11:49 PM on May 10, 2014

All I can say is that companies don't give people breaks out of the goodness of their hearts. They have a need for someone to fill that position and that position usually pays $X. You're the person they chose to fill it, so you should be paid $X. I don't know why you'd let them talk you down from that.
posted by rhizome at 12:03 AM on May 11, 2014

What to say when you negotiate salary.

You could adjust the suggested stragedy to suit your needs, maybe by calling the startup up to tell them you're still very excited about the role but you were offered a much higher salary/benefits elsewhere and needed to a couple of days to consinder your options. (So you give them time and a bit of warning you will be negotiating your salary again.)

The script for the actual negotiation part: I am excited about working at Startup, so willing to be flexible, but was actually thinking of salary $X because I will bring A, B, C value to company.

$X is higher than what you're willing to settle on and you could even justify this being higher than your offer at Other Company since the benefits at the startup are worse and a comparative income loss.

And finally:

"After you make your counter offer, STOP TALKING. Even if you are nervous, bite your tongue. You might feel uncomfortable because you really want this job and want them to see you as a “nice person” or “team player.” Negotiating does not make you a mean person or selfish; stop talking at this point. In this case, my to-be manager expressed some hesitation, but said he’d talk to upper management. When he got back to me at the end of the day, their counter offer was exactly the mid-point I was aiming for, plus a few additional perks I had not even asked for!"
posted by mkdirusername at 6:38 AM on May 11, 2014

Want more money? Get more money. What you make in your current job is a significant factor in what you can expect to ask for in your next job. Go with the corporation and think about your retirement strategy.
posted by oceanjesse at 7:57 AM on May 11, 2014

If the startup position is higher responsibility than the corp one, then they're not just offering you below market rate, they're offering you almost half below market rate. Noooooope. (Qualification: I have taken a pay cut to work at a startup and it was the right decision. This ain't it.)
posted by animalrainbow at 8:37 AM on May 11, 2014

Response by poster: In response to animalrainbow:

The positions are entirely dissimilar. The corporation is for an Analyst-level role and it's based out of San Francisco. Thus, the compensation there is higher to adjust for COL. It also doesn't show much career progression were I to take it; it'd be more of a lateral move. And it's not in a field I'm as interested in, really, though I do find it to be in an interesting and growing space (ecommerce). The only reasons why I'd take it are for the compensation and the potential that I could become a Manager within that department in 2-4 years.

The Startup position is for a Technical Project Manager role. For a similar role at a large corporation, I arguably would not have the qualifications and experience to get an offer. So in that sense, I feel like it's showing pretty good career growth by taking it. My background is in management consulting (3 years; first job out of college) and I'm looking to break into product management. So along those lines, the role also prepares me pretty well for product management in the future.

I do wonder, though, why they pay so below market for the role. And I think the answer is because the role isn't as 'rigorous' or 'difficult' as a TPM role at a traditional corporation, where your technical chops are highly stressed. Typically, you'd need extensive experience with coding or software development to get into that position at a large company. I don't have any of that.
posted by 6spd at 10:41 AM on May 11, 2014

Environment is the big decider here. Personally, I am much happier in a smaller environment, and am willing to take risks for that.

Typically, startups don't/can't compensate as well as the big companies. However, if they're well funded, there is movement opportunities. Did you find them through a recruiter? If not, use that to your advantage — recruiters normally charge 10-20% first year salary. If they like you, they can make $10k-$15k happen.

Also, if they're stuck on salary, work on options, especially if you plan on staying over a year. Startups usually lowball equity offers, even if they have a large available pool. https://www.wealthfront.com/tools/startup-salary-equity-compensation

Remember that the options are not cash, and so view them as a risky investment you're making (in exchange for lower salary). Make sure the investment makes sense.
posted by andrewconner at 11:23 AM on May 11, 2014

For a similar role at a large corporation, I arguably would not have the qualifications and experience to get an offer.

Not true. Two years ago my girlfriend was headhunted by [a huge company you've heard of] to be a PM with only advertising production experience and no college degree. She just got back from a design award ceremony in NYC for a project she shepherded. She does not have "technical chops" in the way you imply are needed, at all, and in fact I think highly technical people do not make great TPMs because they don't have the right boundaries and can tend to overinvolve themselves rather than keeping their eye where it should be: on the schedule. Your management consulting history is very relevant here!

Unless you're in the certification-driven operations PM world, the requirements for a TPM are very fluid and in the computer world tend to be oriented around simply being a person who can communicate effectively to technical people, creatives and business types. Don't sell yourself short!
posted by rhizome at 2:18 PM on May 11, 2014

It is absolutely fine to keep negotiating in your situation. The only time when it can turn people off to keep negotiating if when you're already well above market, and you still keep pushing. Or if you're pushing for something really shallow, like a corner office.

Why do you say you're "eligible for options"? Does your offer not include stock options immediately? It should. This is important, since it will become drastically more difficult to give you options later on. The board has to approve the grants, and it's much harder to get them to approve grants for someone already at the company vs a new employee.
posted by cheesecake at 1:29 AM on May 12, 2014