But it depends on what you’re paying this person. Startup Stock: Particles and Waves. 2019 Startup CEO Salary Report. Here's an illustration from Dustin Moskovitz's presentation, Why to Start a Startup from Y Combinator's Startup School on the chances so "making it" for a startup that has already raised seed funding. We’ll help you figure out the best startup CEO salary for your company Please verify your address ( ) — click the link in your verification email. [Please do not rely on these as tax advice to your particular situation, as they are based on many, many assumptions about an individual's tax situation and the company's compliance with the law. Originally published February 12, 2014. A vice-president of sales at a late-stage, Series D (or later) enterprise company is raking in $242,500 in base salary, but their total cash take-home is around $450,000. Fully Diluted Capital = the number of shares issued to founders ("Founder Stock") + the number of shares reserved for employees ("Employee Pool") + the number of shares issued or promised to other investors ("Convertible Notes"). Based on what I’ve seen in the past, 0.5% to 3% is typical for an experienced VP post Series A funding. This post walks through the negotiation issues in joining a pre-Series A / seed-funded / very-early-stage startup. Salary estimates are based on 212 salaries submitted anonymously to Glassdoor by CMO employees. Proposed in the U.S. Senate - Changes to Startup Employee Equity Taxation - CEO and Worker Pension Fairness Act. Navigating the Pandemic with Insights from The Great Recession - Q2 2020 Newsletter - Stock Option Counsel, P.C. And if other benefits such as retirement or healthcare were to be factored in, the difference between pay at startups and older firms might be even less significant. The Equity Issues are Between the Lines, Fall 2018 Newsletter - Stock Option Counsel®, New Blog on Change of Control Terms - New Videos - Summer 2018 Newsletter - Stock Option Counsel, P.C, VIDEO: Founder Restricted Stock Purchase Agreements, VIDEO Startup Stock Options: Exercise Price Basics, Change of Control Terms for Startup Stock Options, Restricted Stock and RSUs. A startup’s Series A financing shouldn’t be a large liquidity event or salary payday for the startup’s founders. Not only is there a high risk that the company will not be successful (and the equity worthless), there is a high risk that the milestones will not be met. Q: What form of equity should I receive? Second, there is a huge risk that the company will never raise a VC financing. In addition, here’s an example of how a startup CEO’s huge salary didn’t help his startup: CEO’s $500,000 Salary Burns Startup Into Fire Sale. This would reduce the value of your stock options by the increase in value of the company. Restricted Stock Units ("RSUs"). It’s a 10% increase from prior salaries, but still … The remainder would be treated however the company agrees it will be treated in the acquisition negotiation. When you join an early-stage startup, you may have to accept a below market salary. Q: Is there anything tricky I should look out for in my stock documents? For example, a common pre-money valuation at a VC financing is $8 million. If your role at the company is not expected to extend for four years, negotiate for an vesting schedule that matches that expectation. Base salary. Clawbacks for Startup Stock - Can I Keep What I think I Own? You probably will not have a choice between RSUs and stock options (ISOs or NQSO) unless you are a very early employee or serious executive and you have the power to drive the company's capital structure. The CEO’s salary sets a cap for everyone else. If the company answers "yes" to this question, you may forfeit your equity when you leave the company or are fired. For post-series B startups, equity numbers would be much lower. In practice we have found that if you only ask one question, ask that.”. What are the chances of a seed-funded startup becoming a "unicorn" (here, defined as having 6 rounds of funding rather than the traditional definition of a $1 billion valuation). But vesting should make sense. You'll be negotiating your equity as a percentage of the company's "Fully Diluted Capital." Whether higher salaries at startups actually compensate for the higher risk of unemployment associated with working there isn’t clear yet. Or if the company makes certain choices at acquisition, your tax treatment may be different. So if you are joining at an early stage and are willing to lay out some cash to buy common stock, ask for Restricted Stock instead. To cover up salaries of people involved; Additional market research; Finalization of product/service to be introduced into the market; Series A round of financing is generally done when a company is generating some revenue, though it might not be net profit. And so on. Bull’s Eye: Negotiating the Right Job Offer, VIDEO Startup Stock Options: Negotiate the Right Startup Stock Option Offer. At this stage, founders are working with a very small team (or even by themselves) and are developing a prototype or proof-of-concept. If they delay granting you the options until after a financing or other important event, the FMV and the exercise price will go up. While a startup typically receives millions of dollars in a Series A, if too much of that $$$ flows guaranteed to the founders, various incentives get out of whack. The startup community focuses most of the term sheet discussion on liquidation preferences and anti-dilution, but startup CEO salary is nonetheless an important issue. Cashfree, an Indian startup that offers a wide-range of payments services to businesses, has raised $35.3 million in a new financing round as the … According to equity expert Bruce Brumberg, "You must read your whole grant agreement and understand all of its terms, even if you have little ability to negotiate changes. Since your risk is higher than a post-Series A employee, your equity percentage should be higher as well. These are the most tax advantaged forms of equity compensation for an early-stage employee in order of best to worst. Series B is definitely not 250-300k cash plus a few hundred k in equity. No. : 1. Explore by role, location, skill, or market. But if the startup’s CEO gets a huge salary, the startup CEO could likely view his or her equity stake as “house money” (i.e., even if the startup fails, the CEO won’t feel too bad because he still received got a hefty salary). You should base this percentage on your anticipated contribution to the company's growth in value. I understand that earlier-stage startups can’t match the salary specifically, but I would expect higher equity in exchange for taking a risk. Originally published February 12, 2014. Early-stage startups very commonly delay making grants. "Hey baby, what's your employee number?" Not all startup founders understand this tenet. Yes. Pre-funding it’s usually much higher. If a startup CEO’s post-Series A salary is too high, he or she may not have a true sense of urgency to implement and/or create shareholder wealth. Be aware that many early-stage startups will likely ignore Convertible Notes when they give you the Fully Diluted Capital number to calculate your ownership percentage. [Tie] Restricted Stock. You can guess what happened to the deal. I received an offer for $80,000 in Raleigh, and after adjusting for cost of living, that’s over $150,000 in San Francisco. You may continue to earn that value over the next half of your vesting schedule, but not if you are terminated after the acquisition. Earlier this year, this issue presented itself when a client was the lead investor in a Series A round of about $2MM at a $4MM pre-money. Yes. Here, she shares some of her golden rules for compensation and the system that she thinks strikes the fine balance between a startup’s needs and keeping employees happy. First, your ownership percentage will be significantly diluted at the Series A financing. Since you own the shares, your capital gains holding period begins immediately. Last year, we analyzed data from 125 startups to find that the average 2018 salary for a startup CEO was $130,000. Lolwut you guys have no idea about small startups. You can also use AngelList’s new salary feature for comparables. Please see this FAQ about her services or contact her at (650) 326-3412 or at info@stockoptioncounsel.com.. Updated April 6, 2017 and August 7, 2019. If they haven't closed the deal and put millions of dollars in the bank, the risk is high that the company will run out of money and no longer be able to pay you a salary. If it is set at a high level, you end up burning a whole lot more money. Silicon Valley Wins Big With Tax Break Aimed at Small Businesses: An eight-figure IPO windfall can mean a zero-digit tax bill →. Startup salary and equity data for thousands of marketing startup jobs. salaryseries astartupVenture Capital. that’s why most of startup wont get good passionate people. ivan ner HR Manager at VR October 1st, 2016 Let's say the company has not gotten to the point of break even, it is located in NYC and it has 4 members on the management team after … Or if there are price fluctuations in the year of sale, your tax treatment may be different. No. The timing and, therefore, price of grants does not matter much if the company is a failure. Subscribe to the Crunchbase Daily Q: Who will guide me if I have more questions? • DISCLAIMER, Joining an Early Stage Startup? But you pay ordinary income tax and FICA taxes on the value of the shares on the vesting date or at a later date (depending on the company's plan and when the RSUs are "settled"). Convertible Notes are issued to angel or seed investors before a full VC financing. No related titles found. This price is not negotiable, but to protect your interests you want to be sure that they grant you the options ASAP. By Shelly Banjo Business is booming for Medal.tv as house-bound users flock to the gaming startup, making it one of the rare coronavirus success stories. You are not taxed at grant. The company will set the exercise price at the fair market value ("FMV") on the date the board grants the options to you. During my seven years as VP on Sequoia’s Human Capital team, I’ve helped dozens of early-stage companies hire their first engineering leader—which means I’ve seen dozens of candidates take risks on Series A roles with a lot of success. Anything else is off-market and is a sign that the founders are trying to be too creative and reinvent the wheel. 1. Attorney Mary Russell counsels individuals on startup equity, including founders on their personal interests and executives and key contributors on offer negotiation, compensation design and acquisition terms. Look for repurchase rights for vested shares or termination of stock options for violations of non-compete or bad-leaver clauses. Welcome to the Stock Option Counsel, P.C. The term sheet was pretty much a done deal, when the startup’s CEO demanded a salary of $25,000. But if the company has great success within its first years, it is a huge problem for individual employees. This is very often outside the control of the employee or even the founders. 4. When you negotiate for an equity package in anticipation of a valuable exit, you would hope that you would have the opportunity to earn the full value of the package. In other words, you have infinite vesting as you don't really own the shares even after they vest. Negotiate Your Equity and Salary with Stock Option Counsel Tips, Josh Lerner, Harvard Business School’s VC expert, 90 percent of new businesses don’t make it from the seed stage to a true VC funding and end up shutting down because of it, Dustin Moskovitz's presentation, Why to Start a Startup, Think of yourself as a late-stage founder, 1% may make sense for an employee joining after a Series A financing, Look for repurchase rights for vested shares or termination of stock options for violations of non-compete or bad-leaver clauses. Seed-funded startups would offer higher equity—sometimes much higher if there is little funding, but base salaries will be lower. The startup I work for just raised a $6M series A. They’re bumping salaries, which is great. Startup Lawyer is a website for participants of the startup ecosystem. Pre-Seed funding is a website for participants of the investment raised and the 's. In value % of companies with legitimate seed funding go on to raise follow-on.... Company is to build something new or just collect paychecks depend significantly on the assumption these... Your percentage ownership shares even after they vest founding and Series a in my stock options and... Ceo salary Report seed investors before a full VC financing is $ 8 company! Startup valuation off-market and is a failure in my stock documents vesting schedule matches... The size of the company makes certain choices at acquisition, your Capital holding. 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