If you’re pursuing a job at a startup company, one of the most important factors you’ll need to consider is compensation, which is commonly structured differently than at a mature company. This is largely dependent on the life stage of a company, which can greatly impact compensation, as well as work-life balance, risk, and upside.
Compensation at a startup company is largely made up of three components: salary, benefits, and equity. The value of each depends on the stage of a company’s growth, the role, and an employee’s previous experience. A good rule of thumb, though, is this: The earlier a stage the company is in, the lower the salary and benefits will be, but the higher the equity will be. As the company matures, the scales start to tip in the other direction. Let’s talk in a bit more detail about each of these.
As mentioned above, salary is largely contingent on the company’s stage, the role, and the employee’s previous experience. There is no one-size-fits-all here. At an earlier-stage company, you can almost certainly expect a lower base salary than the industry norm, regardless of your previous experience. As the company matures, the salaries of all positions start to get closer and closer to market rate. If you’re curious what to expect, we recommend playing with the salaries and equity tool by AngelList or researching salary ranges at specific companies on Glassdoor or checking out our ebook.
Benefits at a startup are also largely dependent on stage. If good benefits are important to you, then an early-stage startup is likely the wrong place to work. However, as a startup grows, its benefits often become an extension of its culture and are used in all recruiting efforts. Take, for instance, Airbnb, which offers a $2,000 travel stipend to all employees. Other startups may allow pets at the office, or offer gym and other discounts, catered lunches, generous vacation policies, or flexible remote-working options.
Equity: Stock and Vesting Schedules
Equity is often the most confusing and intriguing part of a compensation package at a startup. Equity refers to ownership of the company, and this can be extremely valuable if the company ever sells or goes public (learn more about startup fundraising here).
What’s important to know here is that no employee is ever “given” equity. Instead, employees often receive stock options, which are the option to purchase equity in the company at a heavily discounted price. You also are not given all of your stock options up front; rather, you earn an increasing amount of options over a four-year period. That four-year period is often referred to as a vesting schedule. The typical vesting schedule gives you one-fourth of your options at the end of your first year, and then 1/48th every month after that. Once your options vest, you have the right to purchase them (or not).
Getting into a company early has a big impact on the amount of stock options you receive and at what price. If you join a company early, you are often rewarded with a higher number of options at a much lower price. As the company matures, the risk gets lower and its ability to pay market-rate salaries improve, so you will typically receive fewer stock options and at a higher purchase price.
The benefit of purchasing your options is that eventually — fingers crossed — the company will sell or go public and you will get a big payday. For example, early Instagram employees turned their stock options into an average profit of nearly $8 million! And there’s the famous example of the Facebook muralist who was compensated in stock options that were eventually worth north of $200 million. Of course, these examples are far on the ludicrous side of the scale, and many people don’t make any money from stock options — but risky or not, they’re part of what makes joining a startup so exciting.
How to Negotiate Your Startup Offer
There are special considerations to make when negotiating your compensation at a startup. Macia Batista, formerly a career coach at General Assembly’s New York campus, walks you through essential steps for building your ideal job offer.
- Know your minimum number. Leverage sites like PayScale and Glassdoor to learn to learn what employers in your city are paying for similar roles and industries. Do your research ahead of time to fully understand the fair market value for the position, taking into account background and experience. Know your worth!
- Provide a salary range. Determine a range for yourself, then ask for the upper half of it, so you can negotiate down if needed. Giving a range demonstrates flexibility. It gives you the opportunity to ask for more when an offer is presented, and negotiate other variables, like 401k contribution, remote work options, or vacation days. Tell the hiring manager, “I’m targeting roles with a range of X, but I’m focused on the entirety of the package including culture, growth, and mission.”
- Consider the whole package — not just salary. Compensation goes beyond your paycheck. When weighing a job offer, look at factors like bonuses, equity, health care and retirement plans, transportation costs, schedule flexibility (e.g., working from home and vacation time), and potential for growth at the company.
- Ensure your pay increases with funding. If you’re joining an early-stage startup, equity (stock options) is oftentimes part of the compensation package, since these offers often fall below market salary. However, you should be be earning a fair market-value salary as soon as the company raises real money. I recommend signing a written agreement with your employer to guarantee a pay increase once the company has more capital.
How to Land Your Dream Startup Job
Working in the startup world can be one of the most challenging, exhilarating, sometimes heartbreaking, and oftentimes fulfilling journeys of your life. But before you find first startup job, there are terms to learn, steps to take, and skills to grow to make you a candidate who stands out from the crowd.
In our eBook, How to Get a Job at a Startup, we’ll help you find your dream startup job through the knowledge of startup job-hunters, founders, and employers. Get firsthand tips on how to break into a startup career, clear up confusing industry jargon, and learn about important resources that will aid you on your journey as a startup employee.
General Assembly believes that everyone should be empowered to pursue work they love. We hope you’ll find this book to be a helpful first step in getting there yourself.
How to Land a Job at a Startup
Learn how to start your journey with our exclusive guide.