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Compensation Overview
Who we are
• Tim Wenzel
• Marlowe Rondoni
• Saar Gur
Agenda
• Common questions and surprises
• Options overview: A short test
• Options overview: Getting rich
• Expectations: Market data
• Negotiating an offer
Not covering
• How to evaluate a start-up
• Private companies that are not venture-backed (e.g.,
partnerships)
• Compensation as a founder or pre-VC funding
Question 1
• Should I expect a serious pay cut when I join a venture-
backed start-up?
• Answer (not displayed): Generally ‘no’ unless you are talking about being a founding
participant in a new venture. For most start-ups you can expect the following:
• Answer (not displayed): Again, bonuses are not common except for sales and VP level and up (base comp is
competitive, but total cash comp is 25th percentile). Most start-ups have a salary focal/performance review period.
Merit/increase budgets have been 3% to 4% for salaried staff in past years (lately it’s been pay cuts, no raises,
short work weeks for some positions, deep cuts in certain functional areas).
• Most start-ups are undisciplined on performance reviews, especially promotions. HR staffs are very recruiting
heavy, administration, benefits . . .not compensation and incentives, organization strategy, etc. Further, regular
benchmarking/market studies are done for later-stage start-ups; compression is a problem as is the problem of
‘you get stuck where you entered’ the start-up.
• Option practices vary a lot, but grants are usually done annually based on performance, or goals around ensuring
employees always have unvested options outstanding. Re-ups before IPO and other adjustments are common to
ensure equity allocations are appropriate across all levels. Promotion grants are common as are grants to key
employees.
• General package will be base comp in low to mid $100s; equity will vary wildly on stage, company, etc.; benefits
typically rich/contributions low; 401k but no match; time off moving to PTO 3wks to start (moving away from rich
sick leave/combo’d with vacation)
• Compensation range:
An option is "in the money" when its price is less than the
stock's market value. Conversely, if the market value is less
than the option price, the option is said to be "underwater.”
• Answer (not displayed): Option practices vary a lot, but grants are usually done annually based on performance, or
goals around ensuring employees always have unvested options outstanding. Re-ups before IPO and other
adjustments are common to ensure equity allocations are appropriate across all levels. Promotion grants are
common as are grants to key employees.
Options Overview
Question 2
• Do I need to have cash on hand to buy my options when I
join a company?
• Answer (not displayed): No. You only need cash when you exercise. You can early exercise or exercise on vested
shares (all or a portion in most plans). You need the cash when you exercise.
Options Overview
Question 3
• What happens if I get fired? If I leave? Can the
company buy my shares?
• Answer (not displayed): Typically you can buy your vested shares if you are fired or leave. Some plans have ‘for
cause’ provisions, especially for executives. Buy backs are more the case when you have early exercised and you
are not fully vested in all or a part of the shares you exercised. In that case, the company buys back the unvested
portion. In other cases, the company may retain rights to buy back shares. . .you need to read the equity plan
carefully.
Options Overview
Question 4
• How to I evaluate an option package?
• Answer (not displayed): Know your grant as percentage of fully diluted outstanding shares (your % of the pie);
strike price; dilution assumption; exit assumption. As said earlier, you may not have much more information than
the grant size, options outstanding, and strike price.
Options Overview
Getting rich with options - Example
• Grant of 50,000 options at exercise price of $0.10
• 10mm shares outstanding, fully diluted
▫ 50,000/10mm = o.5% ownership
• 25% dilution before exit
• Exit valuation
• Salary information:
▫ www.jobnob.com
▫ www.payscale.com
▫ www.glassdoor.com
• CES/CMC