Help figuring out a start up job offer?

November 12, 2022 8:07 AM

I've been on a meandering career path and received an offer for a start up. I've never worked at a start up, and would love folks insight with the job offer I received.

It's been a wild couple of years since 2020. I quit a very stable government job, but one that was killing my mental health, and decided to completely switch up and try a different part of my field by working for a mental health group practice. I joined as an independent contractor and have been there since 2021. While I make OK money (pre-tax, the post-tax was a wakeup), there's no benefits and no real investment in the other contractors that make up the whole of the practice. I decided to make up for some of that lack of stability (fluctuating pay per client, and I didn't want to burn myself on 1:1 work), by taking a adjunct role and consulting.

I've been applying for jobs this past few months, both back in government (if they'll even take me back) and at other places that do similar work to what I do as a contractor. I've floated the idea of opening up my own practice but I'm not ready for that to be my entire income, even with the support of a bunch of colleagues who do that themselves. I applied for a role at a start up at the encouragement of a colleague who serves on the board of it.

The start up seems very exciting (as in, what work they're doing in mental health) and seems different than other mental health startups, and is led by people I share many identities with, and they are emphasizing that as part of their mission as far as equity and inclusion goes. They've also tried to emphasize that in company culture. I have one friend who currently works there (only a couple of months) and they love it, they feel fairly compensated and that there's a good work environment.

I know start ups can be risky though, and with everything happening in tech, it seems scary!

But...I also don't have a ton of stability at my current contractor role, and I am not meshing well with the business owner's ethics and business practices.

The good thing about the start up role is that it's completely remote, so the hope is that we can move from our current state to back home, rather than be tied down here.

Anyways, here's the offer received:
- $Xk in salary (it is way lower than I expected, but I know start ups don't make a lot of money in the beginning? It's almost $8k lower than what I make currently, but I also don't receive ANY benefits and have to take out taxes. It is lower than what I made in my first job out of college. BUT - this offer is pro-rated 30 hours of part time work, and does not fluctuate if I see a little bit of clients or a lot of clients, which is appealing to me at this point. They hope to increase to full time in the next year, but I don't know what the pay is or when that will happen. I can also see my own clients in my own practice while I'm still part time to supplement my income.)
- Stock options and company equity, and something about a lower strike price, but I have no clue what that means.
- 401k with X% match (it's higher than what I've received before at state government)
- Health insurance, vision, dental with the first medical (not vision/dental) couple of tiers premiums paid for (I have a couple of chronic health conditions, so I have no clue if I'll be covered)
- Stipends for mental health and other wellness services


Granted, this is not the most exciting offer just based off the low pay, but if I'm able to see my own clients and if the full time pay is higher, it could be tempting. It's just scary that who knows if that full time is guaranteed depending on the success of the start up.

However, I am excited about these things: the mission and the work, the board and the leadership, the fully remote status, and the ability to wear a few different hats since it's a start up and try some things I haven't done before.

It feels like I'm moving farther from that stable government role...which I hope having this experience wouldn't detract from me applying to another government position in the future (maybe my paranoia speaking.)

I'm lucky that I don't have any kids or folks to support until my parents get a bit older, and that my partner is supportive.

My questions:
- What would you make of this offer from a start up?
- Would it be fair to ask in response to the offer things like: How much would full time salary be and when do you expect that to happen? Can I see more information about the health insurance plans/premiums? I'm super tempted to ask "How much longer do you all have funding for?" but it feels rude to ask in response to a job offer email, and something I should've thought of in the interview.
- Can/should I negotiate? It's a start up, so I feel like they don't have much to begin with, but the salary is lower. If I did the math right, my estimate for full time 40 hours would be way closer to what I'd want to make, so maybe I shouldn't negotiate if that might come down the line?


Thanks in advance!

posted by socky bottoms to Work & Money (8 answers total)

Having just looked at my health insurance exchange options for next year, a 30 hour a week salaried with benefits job that was only 8k less a year than my pretax consulting fees would be very attractive as my health insurance is going to be 5k next year. You need to compare the hourly rate though, so I'm not exactly sure how you arrived at that number. I would convert their salary to 30 hours a week/52 weeks a year, add a extra third because of the tax savings for not being self employed, and compare that to your hourly consulting rate. If it's even close, it's a good deal because you can still choose to take 10+ hours of higher rate consulting on top and get benefits. You'll be able to be pickier with your consulting jobs because you have less hours to fill, so can negotiate a higher rate.

Specifically for startups, you should probably treat the financial value of the stock options as almost zero because there is a high chance they're never worth anything. But, it is very nice to have some ownership of a startup that is doing things you personally believe in.

I would definitely negotiate, and it's part of the same discussion about what they're going to do if they want 40 hours of work. I would personally expect a salary that is more than 1/3 higher for a jump from 30 to 40 hours, because 40 often means 55 at a startup. You can either negotiate this now, or take this offer and negotiate if they want to bump the hours. Startups are almost always willing to negotiate, but they probably can't bump the initial pay much. You should also read the employment contract very carefully as it will specify what kind of outside work you can take, and you might need to negotiate that as startups often have bad employment contracts
posted by JZig at 8:28 AM on November 12, 2022

The x in the salary makes a difference. If x = 100, you might be able to negotiate back a big part of the 8k difference. Maybe not all 8k, but at 100k, 5k either way probably isn’t going to make a huge difference to them.

But most startups will trade salary for equity, so you really have to ask about the equity they’re offering you. Remember, though, the reason that startups offer equity as compensation is that x% of 0 is 0. If they’re not getting acquired or having an IPO in the next several years, that’s several years where that compensation is nothing.

Not only should you ask about their funding, it should be your first question. It’s not rude at all. Stable companies are happy to talk about their stability. The ones who act like you’re being rude are just embarrassed by their inability to satisfactorily answer the question.
posted by kevinbelt at 9:05 AM on November 12, 2022 [1 favorite]

My advice, having survived a startup, is to treat the equity as a lottery ticket. If it happens, great, you might get a few bucks, The way these things are structured, if you're not a founder, odds are any ISOs (incentive stock options, equity) you receive is going to be watered down to the point of near-worthlessness, though, unless they are acquired for truly mad money.

You mentioned a strike price, so I'm guessing you're being offered ISOs (Incentive Stock Options). The way this typically works is that you are granted X shares of the company, vesting over Y years, with the strike price determined by the valuation of the company at the time the shares were granted to you. As long as you stay at the company, you have the option to buy (exercise) your vested options if the company should go public. If you leave, you have a short period of time (usually 60-90 days) to decide if you want to exercise or not. If the company goes public, you can exercise your right to buy shares at the original strike price. For example, if the shares are valued at $1.00, you can theoretically earn a $0.25 profit (less taxes) per share by buying for $0.75 and turning around and selling immediately on the open market for $1.00. If the company is acquired, they often negotiate a conversion of your ISOs into shares of the acquiring company. If you leave, exercise and the company never goes public or gets acquired, you lose any money you spent on shares. If you stay and the company goes out of business, you never get to exercise, so you don't lose money, but the options are worthless.

In my case, I received something like tens of thousands of shares with a strike price less than a dollar. I forget the exact number of total shares (this is a thing you can ask; they may not tell you but they really should). Over the next several years, the company did a few more rounds of fundraising and issued even more shares. They granted me more shares too, as a feel-good gesture for morale, but I do not believe the shares they issued counteracted the dilution from outside investment.

I eventually left, and did not choose to exercise my options. My judgement was at least slightly poor because, a few months later, the company was acquired by a publicly-traded company for what feels like a lot of money. Folks who stayed are NDA'ed but I get the impression that people who joined slightly after me got maybe a modest new car's worth of profit, less taxes, when their ISOs converted.
posted by Alterscape at 9:26 AM on November 12, 2022 [4 favorites]

Response by poster: @Kevinbelt Oh, yeah not talking about 100k here. It was a really low offer, but I guess reasonable for part time. Like below market rate.
posted by socky bottoms at 9:44 AM on November 12, 2022

I took a very much below market rate for a start up because I had no other employment at the time. It ended up being a terrible match for us both and I was ushered out after a couple of months. I didn’t take it personally because I was not a good fit for that job. The start up did not survive and I went on to do freelance work for which I was well-suited. I think start ups are tricky. I worked at three, I did a good job at two, but none of them survived. As mentioned above, it is not rude to ask about funding. It is imperative to ask about funding. The company will shed you in a heartbeat if they need to. That is true of all companies. So do your homework and if you decide you want this job, just don’t be surprised if it ends sooner than expected. Start ups, in my experience, are never boring but they’re also the opposite of stable.
posted by Bella Donna at 11:42 AM on November 12, 2022 [3 favorites]

You sound like you are being very conciliatory because they are a start-up but start-ups come in all different shapes and sizes. I know people are often deliberately vague on MetaFilter for good reasons but do you actually understand their business model. How do they make money? Is there product here or are they just selling the services of their employees? Is the salary that they are offering lower because they are in startup mode or is it all they can afford to pay going forward? If it is due to an initial startup phase, how long will that last and is there a built in pay review when certain targets are met?

Since these folks need money to pay your salary (and you don't want salary money diverted to things like keeping the lights on) it is totally reasonable to ask where their current funding comes from, how long that will last and what they expect to happen next (more investors? new grants? a profitable level of clients?). I wouldn't completely believe their answers - they will be trying to be reassuring and make things sound good - but at least you can do a reality check to see if their plan makes sense based on what you know about your industry.

So, don't be embarrassed to ask enough questions to have a general understanding of how they plan to afford to do all of the wonderful things in their business plan.
posted by metahawk at 5:24 PM on November 12, 2022

I (professional, with advanced degree) have worked several times as a part-time employee with benefits and each case my pay was the % of the full-time salary. So same hourly rate as full-time but less in my paycheck since I worked fewer hours. So, in my world, the default would be that going from part-time to full-time would just be the same hourly wage for more hours with a possible bump in benefits.
posted by metahawk at 5:32 PM on November 12, 2022

As others have said, value the options at $0. I got $300 for three years of work and at another company, I got $2500. They likely won’t tell you the details to understand the whole picture, anyway.

Is this job going to take you where you want to go? Each job should be a stepping stone to the next, better job.

I would think since you are one practitioner among many, they will not value you well (because you are so replaceable to them). So unless you get something really good out of it, I recommend you pass.
posted by Monday at 11:22 AM on November 13, 2022