Understanding and Negotiating Compensation
This was a presentation originally prepared for a code school graduating class a couple years back.
Hi, I’m Gabe.
Tech startup employee, founder, consultant for 15 years
negotiating a job offer yields 7% higher salary on average
Information asymmetry is your enemy.
Being underpaid, even once, can have long-term career and financial repercussions.
two different approaches
I’m much more interested in something specific about the job/company than the size of the initial offer.
I will consider any reasonable offer.
-You, when asked for a second time.
You are in a much better position to know how much I’m worth to you than I am.
Some companies insist on getting a salary number from you
It’s increasingly common to ask for salary history
Your hiring manager probably has more experience at this than you do.
A better Approach
“Anchor” the negotiation by naming a number first.
Pick the top of the range.
Ask for a very specific number.
Be willing to say no.
Do your research
Name a range (e.g. 80-100k)
Focus on personal needs
Tell the hiring manager what your current/previous pay is if you can avoid it
Be too quick to answer
Always ask questions, try to understand what they want and where they’re coming from
Empathy is a two-way street, if you establish rapport with your hiring manager they can and likely will advocate for you. Ask what they’d do in your situation, how they negotiated their current salary, etc
Consider the entire package: salary, time off, benefits, equity, commute, ability to work from home
Part 2: Equity compensation
wtf is equity?
Public vs private companies
working for lottery tickets
Incentive Stock Options
Options give you the right to buy shares at a certain price
This is the “strike price”
The difference between the strike price and the market value of your shares determines how much money you’ll make at a liquidity event
If there’s no liquidity event or if the sale price is lower than your strike price, you make nothing or even lose money.
Acquisition / merger
Questions you should be asking
What’s the exit plan?
When would it occur?
How many options do I get?
What’s the vesting period and cliff?
What’s the option exercise period?
How many outstanding shares are there?
What’s my strike price?
Is vesting accelerated in a liquidity event?
What liquidation preferences exist?
exits and timelines
It takes money to make money
calculating the value of your options
your options / outstanding shares * 100
= ownership percentage
20k / 30m * 100 = 0.0666%
strike price = $0.35
company sale price = $200m
dilution is 50%, there are now 60m shares
you walk away with $59,800
Investors get paid first
1x is standard
2x or more, is a red flag
There are some edge-cases I didn’t cover
The tax implications are similarly complicated
Publicly Traded companies
Way more straightforward
RSUs are worth actual money
Still subject to a vesting period
You can and should sell them
Negotiate your salary aggressively.
Equity is nice but it’s complicated and often ends up being worthless.