Software developer negotiation for base pay and stock options.
September 9, 2018 1:05 PM Subscribe
I've been asked to be the managing software engineer on a small project at work.
In exchange for taking on this role, I've asked to renegotiate my compensation package.
I'm having trouble coming up with accurate compensation numbers for equity and other available perks.
Does anyone have advice or resources to estimate what amount I should negotiate for?
I'm currently working as a software developer for a small, early-stage startup (I started just before Seed round closed and we're now slightly post Series A closure).
I've recently been asked to take on new work responsibilities; including technical management of a small project/team and mentoring junior developers.
I've told our CEO that I would be willing to do this, but would be renegotiating my compensation package. Which means I have to come up with a proposal for total compensation, including base pay/equity/other perks and benefits and be able to justify those numbers.
For base salary, I've got a fairly solid idea of what's average for my area (Cincinnati) and level of experience (Bachelor's with 3-4 years experience). I've already found resources (Stackoverflow Salary, Paysa, and Glassdoor) to back these numbers up, though I'd be very interested in any other resources on this.
What I'm having trouble with is figuring out how much equity (incentive stock options) I should be receiving as part of my total compensation and justification for why I should be receiving that amount. I'm also having trouble coming up with other things like perks, benefits, or title that I should negotiate on.
Has anyone found good resources on this in the past?
What other benefits or perks might I be able to negotiate for in addition to my base pay and stock?
I'm currently working as a software developer for a small, early-stage startup (I started just before Seed round closed and we're now slightly post Series A closure).
I've recently been asked to take on new work responsibilities; including technical management of a small project/team and mentoring junior developers.
I've told our CEO that I would be willing to do this, but would be renegotiating my compensation package. Which means I have to come up with a proposal for total compensation, including base pay/equity/other perks and benefits and be able to justify those numbers.
For base salary, I've got a fairly solid idea of what's average for my area (Cincinnati) and level of experience (Bachelor's with 3-4 years experience). I've already found resources (Stackoverflow Salary, Paysa, and Glassdoor) to back these numbers up, though I'd be very interested in any other resources on this.
What I'm having trouble with is figuring out how much equity (incentive stock options) I should be receiving as part of my total compensation and justification for why I should be receiving that amount. I'm also having trouble coming up with other things like perks, benefits, or title that I should negotiate on.
Has anyone found good resources on this in the past?
What other benefits or perks might I be able to negotiate for in addition to my base pay and stock?
There's a lot of discussion around the concepts around stock options, but at the end of the day its really what's important to you. Is it work/life balance as cgg indicates? Is base pay more important to you than stock options? Is job title important to you internally to the company or externally as you look for your next gig? What about having flexibility around what your next project is? In the end, all of those things have different importance to different people.
When all is said and done, titles are cheap. Your direct compensation (liquid or retirement, not stock options), your sanity, and your freedom are your most important assets.
Also, I mefi mailed you some resources.
posted by miasma at 1:57 PM on September 9, 2018
When all is said and done, titles are cheap. Your direct compensation (liquid or retirement, not stock options), your sanity, and your freedom are your most important assets.
Also, I mefi mailed you some resources.
posted by miasma at 1:57 PM on September 9, 2018
Compensation is a dial that can be turned in a lot of different directions. Higher salary might be worth it if you think the company won't hit a big exit. If you do think the company will hit a big exit, maybe some equity is worth taking a risk at a lower salary now.
Please keep in mind that "equity" is not a simple concept. There are probably multiple types of equity. I got burned in my first startup environment because I had no idea, so when I got given options, i didn't know that the options I was given were given lowest priority. Even though the company was successfully sold in the eyes of the angel investors and upper management, I got absolutely nothing out of it. My copious "shares" turned into some miniscule percentage share in low class options at the other company. In my second startup, I asked questions and pushed and got a better share class in my options and when that company sold, I saw significant cash benefit.
Options like this are a crapshoot. There are exit strategies for companies that might leave you out. The best you can do is try to have small amounts of the same types of shares as the founders/exec management do. How the company is setup is something you need to learn in order to know what you are getting. I think in my first company, there were class A, AB, and B and A was the bad one. My second company had A and AB where AB was the bad one. You have to learn how your company is setup and maybe even if they have exit plans what their goals are. If they are trying to get bought out for $5M-$8M in the next 3 years, maybe a half a percent equity might be worth $10k of salary per year.
When people say "vacation package" and "work life balance" they are in their 30's. All of that is a choice too. If you are in your 20's and working too much is actually an enjoyable option and you believe in this company, go for it.
posted by cmm at 2:27 PM on September 9, 2018 [1 favorite]
Please keep in mind that "equity" is not a simple concept. There are probably multiple types of equity. I got burned in my first startup environment because I had no idea, so when I got given options, i didn't know that the options I was given were given lowest priority. Even though the company was successfully sold in the eyes of the angel investors and upper management, I got absolutely nothing out of it. My copious "shares" turned into some miniscule percentage share in low class options at the other company. In my second startup, I asked questions and pushed and got a better share class in my options and when that company sold, I saw significant cash benefit.
Options like this are a crapshoot. There are exit strategies for companies that might leave you out. The best you can do is try to have small amounts of the same types of shares as the founders/exec management do. How the company is setup is something you need to learn in order to know what you are getting. I think in my first company, there were class A, AB, and B and A was the bad one. My second company had A and AB where AB was the bad one. You have to learn how your company is setup and maybe even if they have exit plans what their goals are. If they are trying to get bought out for $5M-$8M in the next 3 years, maybe a half a percent equity might be worth $10k of salary per year.
When people say "vacation package" and "work life balance" they are in their 30's. All of that is a choice too. If you are in your 20's and working too much is actually an enjoyable option and you believe in this company, go for it.
posted by cmm at 2:27 PM on September 9, 2018 [1 favorite]
Best answer: Unless you work in sales, where your ability to negotiate this is kind of a hazing ritual, coming up with your own compensation package is not your job, and it's extremely unlikely to result in a good outcome for you. Do everything you can to make sure they make the first offer.
In any case, judging by this question, you almost certainly do not have the information you need to come up with an offer that is fair for you and possible for them. Whoever comes up with an initial equity offer (which again, should not be you!) needs to know at least:
The CAP table in particular is closely held information, and they may not be willing to show it you you, but the idea of making the first move in an equity negotiation without access to this is ludicrous. That's why they need to make the offer. Talk to the CFO if necessary.
posted by caek at 4:30 PM on September 9, 2018 [7 favorites]
In any case, judging by this question, you almost certainly do not have the information you need to come up with an offer that is fair for you and possible for them. Whoever comes up with an initial equity offer (which again, should not be you!) needs to know at least:
- how many outstanding shares there are
- the company’s current (409A) valuation
- exercise price of (per share)
- fair market value (per share: a made-up number, but possibly useful)
- if they’re offering ISOs, NSOs, or RSUs
- how long after leaving do you have to exercise?
- the CAP table
- are early exercise and triggers involved
The CAP table in particular is closely held information, and they may not be willing to show it you you, but the idea of making the first move in an equity negotiation without access to this is ludicrous. That's why they need to make the offer. Talk to the CFO if necessary.
posted by caek at 4:30 PM on September 9, 2018 [7 favorites]
If you’re getting paid a market salary then that limits how far you can reach for options. Options are meant to make up for a reduced salary and the risk of suddenly losing your job. If your salary is at market the risk can be judged by runway. It would be highly unusual for the company to provide you all the info outlined by cask but current runway (how long the company can operate without needing to raise more capital) is a valuable, and usually accessible, metric in gauging risk.
My personal opinion and totally bulkshit estimate would be to maximize salary if you can and ask for 3x your current options.
posted by bitdamaged at 6:39 PM on September 9, 2018
My personal opinion and totally bulkshit estimate would be to maximize salary if you can and ask for 3x your current options.
posted by bitdamaged at 6:39 PM on September 9, 2018
Best answer: For comparison data: Jackie Luo (engineer at Square) has a long twitter thread reposting tech compensation information anonymously, which frequently includes location, type of role, type of company, and a breakdown of salary/bonus/equity.
Self-reported anonymous data points, so take with however much salt you choose. I will say that there are several companies in the thread where I have first- or second-hand data, and the posts in this thread are accurate for those companies.
posted by fencerjimmy at 8:49 AM on September 10, 2018
Self-reported anonymous data points, so take with however much salt you choose. I will say that there are several companies in the thread where I have first- or second-hand data, and the posts in this thread are accurate for those companies.
posted by fencerjimmy at 8:49 AM on September 10, 2018
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For me, title was huge because in a big org, people you don’t know but need things from
judge how seriously to take you by your title. In a smaller startup, i can’t see this being an issue.
For me, the things that are most important to me now are maintaining a work like balance. I would be negotiating vacation days and work-from-home strategies.
posted by cgg at 1:27 PM on September 9, 2018 [1 favorite]