If a successful startup's CEO makes what I believe is a low offer for employment as CTO, how can I make an effective counteroffer?


4

Over the past ten months, I've been working with a startup in a technical capacity as a contractor. Prior to my joining, they had a rocky start and spun their wheels for a while with an outsourcing companies. I put together an internal team, and we revamped the website, rebuilt the technology from scratch, and constructed mobile applications.

As a direct result of this work, the company was able to raise a large funding round, and was featured in TechCrunch and mainstream press. Since then, the bleeding has stopped and the company is close to cash-flow positive; it will be in the black in six weeks if the current eight-month trend continues. It would not be an exaggeration to say that I rescued the company from the brink of bankruptcy and more or less turned it around.

The CEO has asked me several times to consider dropping my contracting business and working with them full time. I have considered this seriously, as she is a great leader. I also have a great rapport and team relationship with the other corporate members and the technology team I built.

On Sunday, she made a formal offer:

  • $60,000 in salary (this is equal to her own salary)
  • common stock options equal to about 1.5% of the company, vesting quarterly over 4 years, vests immediately on acquisition
  • no benefits

This offer was verbal. In the same conversation she acknowledged that the salary was low, but that she wanted to wait until our financial footing was more stable before we put officer salaries in line with the value people were contributing (i.e. six figures or more). She also described creating an additional options pool to provide awards from on a periodic basis (this would require board approval and doesn't exist yet). Nothing is in writing yet.

I have greatly enjoyed the work, and I think there is a reasonable chance that the company to be acquired within the next, say, 5 years. I'm now trying to decide if this is a good offer or not.

In my opinion, the offer is too low for someone who had an instrumental role in turning the company around. If the company sold for, let's say, $100MM, then I would receive $1.5MM, but there is only a modest chance this will occur. But if I worked 2,000 hours per year at my $200/hr rate, I would make $1.6MM, guaranteed. That seems like reason enough to reject this offer.

So, overall, I don't think this compensation package is enough and I am considering asking for more -- at least 4% of the company, possibly with anti-dilution provisions. Other than simply asking for more options directly, are there any suggestions you'd have that would make the CEO more likely to accept a counteroffer?

Equity Job Offer Stock Options

asked Aug 17 '11 at 15:38
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Exr
21 points

2 Answers


1

On the one hand, you're right that the pay is very low for top-level leadership right now.

Keep in mind, though, that as a contractor, you're by definition going to gross more. How much of that $200/hr is going to taxes? I'd venture to guess around 30% or more (I know that's how much of mine goes, but I know the income tax percentage goes up as you make more), maybe even as much as half.

Also, keep in mind, too, that she's offering you her own compensation, and that the company hasn't officially seen profit yet. Just hiring you on full-time is a risk in and of itself, but one she's willing to take because of what you've already done for the company.

That said, instead of looking at what she's offering now, take a look at what the company could grow into, and your place in it. She seems willing to pay you what you're worth when the finances are there, but just can't do that right now. If the prospects are good enough, it might be worth making the leap.

Another alternative counteroffer you could make, instead of more money (I still wouldn't recommend trying to get more than what she's making, because that could be seen as insulting, too, that you'd expect to make more than the CEO/owner of the company), see if she'll agree to you keeping your consulting as a side gig, at least until the company is seeing real profits and growth. Explain to her that it's lower than what you're used to, and that dropping your consulting business altogether would be a larger risk than you're willing to take until the company has a more proven track, but you understand that what she's offered is what she can currently afford and that asking for more money out of her may put her (and the company) too far out right now.

answered Aug 18 '11 at 02:47
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Shauna
149 points
  • I agree that I don't want to make a higher cash offer -- you're right that it would seem insulting to do that. Thank you for the suggestion. – Exr 9 years ago

1

If your primary driver is money, and you can bill yourself out at over 80 percent at 200 dollars an hour then by all means may maintain your relationship as a consultant.

Money is rarely the best motivator for an affective startup leader. There is a significant difference between consultant and "inside guy." Making that move for money is a bad choice.

answered Aug 17 '11 at 21:02
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Joseph Barisonzi
12,141 points
  • Half-ignorant. On one side you are right, on the other side 60k USD for a leader is insutling low, especially as it also includes NO (!) benefits, which is very unusual. EIther pay market rates + shares instead of bonus, or not, but dont insult a good consultant / leader with a 60k USD offer. – Net Tecture 9 years ago
  • @NetTecture Market rate is one variable of consideration. The other is the health of the company. Market rate is driven by industry, geographic location and a host of other variables that we were not provided. The health of the company is that it is operating in the red, significantly in debt, and just averted bankruptcy. The CEO offered the same base compensation package that she was receiving. It is your and the consultants choice to interpret that as an insult -- but I doubt that was the intention. Most importantly I believe responding as if it was an insult would be a mistake. – Joseph Barisonzi 9 years ago
  • @Joseph: I definitely don't think it was insulting -- I was just a little surprised, because the value of the equity I'm being offered doesn't seem proportionate to the value I feel I would add in the future. That could be because I have an inflated self-estimate, but I don't think I'm being unreasonable here. I'm definitely willing to listen to what she has to say, but I have a family and $60k isn't a whole lot to support them on. – Exr 9 years ago

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