What is a resonable offer for a first employee?
A hardware company is keen to hire employee #1 at $42k/y salary and 0.5% equity (common) with a 4 year vest, 1 year cliff.
The company has been around in one guise or another for ~1 year (though is newly incorporated), is a team of two (founder, co-founder), has finished an accelerator program (at 50k for 6%) and has raised ~$150k via crowd funding.
The company has yet to have a formal valuation, but estimates a net worth of $5m. It is currently seeking further investment of ~$500k.
Besides an initial prototype and design, the company does not yet have a product. The employee would be tasked with building a significant software component of the product. The employee is an intermediate-senior level developer.
How would you rate this offer? Is it fair for the employee?
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Can you give us an idea of how $42K compares to the typical salary for somebody with this amount of experience in your area? It's near impossible to judge this without knowing how much this person would have to give up, compared to their other offers at a "normal" company. – rbwhitaker 10 years ago
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A typical "normal" salary for someone is this area is in the region of $70-80k. – User34083 10 years ago
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Wait, I must have missed this the first time around. How can you be valued at $5M if all you've got is a prototype? Do you have a lot of cash on hand or something? – rbwhitaker 10 years ago
1 Answer
Based on your variables, a 0.5% equity with a salary of $42K seems low. I would suggest increasing it from either side of the scale. Browse the jobs section on AngelList to get an idea for what similar startups are offering. As you'll be competing with them for talent.
Your location will also play a large factor. For example, if you're in San Francisco or NYC where $125K salary for software engineers is closer to the average, a $42K salary would mean giving a larger chunk of equity to attract talent.
You might even want to look into hiring your first employee remotely. The world is full of talented people and it works out great for startups that are conserving resources.
A strategy to hire a great engineer off ODesk is to hire 10-15 at the same time for a small sample assignment and pick the best one at the end. This will still cost you far less time and money than recruiting locally.
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+1 for checking AngelList. "Fair" does not exist in abstract, you need to check the market to find out what will work. – Alain Raynaud 10 years ago
