ideas for compensation contract with series B startup


2

Hi and thanks in advance. I've done some looking around to determine where to start with startup compensation. I work as a contractor exclusively for a startup currently in series b round, I've been with them since they were series A and around 10 employees. They currently have around 30 and are growing fast. My position as the primary designer for the products, along with the product's market in general, has me feeling optimistic about the growth of the company and accordingly I want to "tune out" all other noise by securing some sort of stake in this company.

My idea is to renegotiate my compensation, which currently is a fixed contractor fee and no employee benefits per se, to reflect an equity stake. Since they are a startup I'm happy to keep the wage below "perceived" market value, but add to my compensation package a guaranteed stake of some percentage of the total company equity. I would also ask for that stake to be increased if further rounds of funding occur, because of dilution.

My end goal here to secure a deal that will allow me operate as a bonafide stakeholder in the success of the company, rather than simply earning a wage (which there 10 million different ways of doing.) Being involved with a company at this stage is very exciting, particularly as I've witnessed growth and positive reactions to the contributions I have made in the area of product design.

I appreciate any suggestions. My starting idea is salary + N% non-voting equity, and I was wondering if the vesting variable is open to negotiation? Can it be retroactive to when I began working with them for example? (I know, that might be absurd.)

Thanks for the ideas on the board, everyone.

Funding Equity Compensation

asked Feb 23 '11 at 09:53
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User7991
11 points

1 Answer


3

Your idea of setting the start of the vesting period of your options to the date you started working for the company as a contractor is not absurd and is actually reasonable and fair. However your idea of receiving fixed percentage of the company that will be guaranteed against future dilution is absurd and will not be granted or even entertained by any savvy CEO or board.
Rather than try to negotiate something that is unattainable, I would suggest that you shoot for a percentage that you will be happy with knowing that it will be diluted-- along with the percentages owned by other equity and option holders, including the founders-- if and when the company raises money. Your stake might be increased down the road if your role grows in responsibility or when your initial grant is approaching full vesting, but neither of these can really be hard-wired at the point of joining and require some reliance on the CEO and board to do the right thing.

answered Feb 23 '11 at 10:11
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Zippy
871 points
  • Thanks so much for the feedback. Happy to hear this kind of reality-check. – User7991 9 years ago
  • My pleasure. Glad it was helpful. – Zippy 9 years ago
  • I've seen a few numbers thrown around for that percentage, and I'm not sure what wouldn't be arbitrary. I was thinking of forming that proposed percentage on the basis of what I -think- the valuation of the company is (my best wild guess, informed by knowledge of the funding, size of the company, growth etc.) balanced against a realistic consideration that there are many, many other stakeholders here who have invested real money for what may not amount to large points. Really, I'm guessing. – User7991 9 years ago
  • This article is a useful guide to working out what a reasonable percentage for your contribution might be: [Cutting up the Founder's Pie](http://www.andrew.cmu.edu/user/fd0n/35%20Founders'%20Pie%20Calculator.htm) – Susan Jones 9 years ago

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Funding Equity Compensation