Stock options for a senior engineer at an angel funded startup?


6

I joined a startup 6 months after its founding as a junior engineer (I was right out of college at the time). I've been with the startup for almost 6 years now, and I've progressed to the point of being a senior engineer (there are currently 3 other engineers). Over the course of my time there, I've accumulated options to the tune of 0.43% percent of the company. It's been a while since I've gotten a new grant or a raise, so I think the time has come to ask for another one.

I'm bullish on the company's future (it's survived for 6 years already and I think it's likely to become profitable this year). It's purely angel funded at this point: we haven't taken any VC money. I've been researching exactly how much equity someone in my position should have, and I've only been able to find this information about startups that have completed their Series A (like this and this ). Since we're purely angel funded, my understanding is that I should own more of the company than that due to the increased risk.

Does anyone have any data or rules of thumb that would apply to me in this situation for an angel funded company?

Thanks for the assistance.

Equity Compensation Stock Options

asked Mar 13 '11 at 08:39
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Seth
134 points

5 Answers


7

In all honesty, your grant sounds about like what I would expect in your situation.

It really comes down to how irreplaceable you are, and you have to make an honest assessment of that. Yes, you have been there a long time and contributed a lot, but do you have significant domain expertise that another engineer would not possess?

If the company were to take off and expand, how many more developers would be added? What is the employee pool like? If you got, say, 3%, then what would be appropriate for the next X employees? Does the math extrapolate before you runout of shares?

Your best route to get a higher equity stake is frankly to move to a new company where you are not perceved as the newbie who grew with the company, but as the senior guy who brings experience and expertise.

answered Mar 13 '11 at 08:49
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Brian Karas
3,407 points

4

Based on my anecdotal experience, your equity doesn't seem too far off the mark. Feels a little bit low, given how long you've been there -- but not alarmingly so. If you had started with a company at 1% and they'd gone on to do a couple of rounds of funding, you'd likely be at a similar situation.

I'd have a friendly negotiation for an additional grant and communicate that you really believe in the company and want to be a part of the future success. Another point you can make is that compared to better funded startups, you're likely getting paid below "market value" in terms of compensation. This should translate into a bit more equity.

answered Mar 18 '11 at 04:22
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Dharmesh Shah
2,860 points

3

Compstudy probably has data on this: www.compstudy.com

The Summary report for 2008 is here, 2009 is downloadable after sign-up I believe, and 2010 isn't out yet to non-paying members. Unfortunately, full granularity by funding isn't available in the summary reports. It may be available if you can manage to get access to the full data.
2008 aggregate data in the summary shows that on average, the head of engineering receives roughly 1.32% (1.00% is the median) upon time of hire. You can probably make a rough extrapolation of the amount for your position based on that.

answered Mar 13 '11 at 09:05
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Henry The Hengineer
4,316 points

1

I don't have any data. I am an angel now, and have started, funded and sold several of my own companies. The VP at my last company got eight percent, and I thought he was worth it most of the time. Before that my VP had something similar. By my standards, the engineering VP was the key asset of the company and I treated him that way. I made three out of four millionaires, and I never regretted it.

answered Jun 30 '11 at 02:03
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Mike
11 points

0

If you can discuss your situation candidly with the principals of the company, the "I would be better off quitting and being rehired" argument often hits home (it works best if you are confident you would be clearly the best candidate for your current position). Many small companies have trouble with the concept of "evergreening" which basically means treating the existing employees better than new hires when it comes to remuneration (obviously, I'm talking comparable grades here, if they hire a VP of engineering it would be expected that their remuneration would be higher than a senior engineer's). Some managers need to be led to the conclusion that hiring a replacement is a far more expensive proposition than refreshing existing option grants.

This is all a bit orthogonal to the original question but is intended to point some of the complexities involved. Managers often overlook the people they see every day when thinking about compensation and need to be reminded that a bird in the hand, etc.

answered Mar 20 '11 at 01:58
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Perry
146 points

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