Start up employment - Trial period with ambugious compensation, how to evaluate?


3

A company (pre-funding) wants to do a 3 month trial period with me. I received an offer for X shares of stock.

How do I determine if I am properly compensated for my efforts? The value I would provide for the company in 3 months would be considerable, but how much equity of company's who's-value-cannot-be-determined represents fair compensation?

-daniel

Details:

I am a technical guy and I would be building/planning a good sized section of the company's core infrastructure. This is similar to contract-to-hire situation in which the company owns all the work (and resulting value) I produce.

Equity Trial Compensation

asked Jun 11 '11 at 17:41
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Daniel
157 points

1 Answer


3

Daniel - one approach would be to put yourself in the founder's situation and use Paul Graham's equation: http://paulgraham.com/equity.html.

Obviously you are keen to make sure you get fairly rewarded, and rightly so. Accept that any start-up situation comes with big risks, and if you are not prepared to walk away after 3 months (or more even) with nothing if it all goes horribly wrong, then it probably isn't the place for you.

Also try and understand things from the company's perspective (i.e., existing founders/shareholders) as this will help your negotiating approach. Unless you have a concrete track record and stacks of verifiable references about how you can get on with anyone and always deliver in the face of any obstacle, then they too are taking a risk - one that it doesn't work out for whatever reason, and they feel they have got little value out of your time with them, and therefore can't see why they would want you walking away with any equity at all.

Look for ways that you can reduce risk on both sides, whilst accepting that the startup world is a risky one. (An example would be to have an option to keep the IP or a licence to the IP if you have to part ways, but I'm sure you can think of others.) As a side issue, make sure your legal paperwork (employment contract/vesting agreement/shareholders agreement/etc.) with the firm is rock-solid - worth getting legal advice on this one.

HTH & good luck.

answered Jun 11 '11 at 20:38
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Steve Wilkinson
2,744 points
  • I think, as you mentioned, the reduction of risk instead of focusing on compensation is the best way of looking at it. – Daniel 8 years ago
  • If I may ask, was this 3 month trial totally noncommittal? Was it a verbal agreement? Asking because I am in a similar situation. I'm sure others might be too. – Scott Coates 7 years ago

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Equity Trial Compensation