The company recently got $3M investment. I’m being offered $152k salary and 2% equity, vested over 4 years. Is this good?

My thinking is that 2% of $3M is about $60k, so I could treat that as an extra $15k per year. But if I look at the valuation based on that investment, it is probably worth 5x that, like an extra $75k per year. All in all it is over $200k compensation, which I’m grateful for, but it’s on par with a tech job at a big tech company. Are these reasonable assumptions, or am I missing something?

  • ItchyTheAssHole@alien.topBEnglish
    1·
    1 year ago

    You’re looking at it all wrong.

    1. Your equity is factored against the company valuation, not the investment amount. Seed rounds (which is what this probably is, based on the amount) typically buy the investors 25% of the company, meaning they likely invested at a 9M$ pre money valuation, so the total company valuation is currently around $12M. Thus, fully vested, your equity is actually worth $240K.

    2. As you pointed out, that is just the *current* value of your equity. If the company is successful (a big if), it can attain a 10x-100x growth over the next 5-10 years. While your equity stake will be diluted, the valuation increase will more than make up for it, and your stake can easily be worth millions.

    3. This is only the case if the company is actually successful. Keep in mind that only 10% of startups manage to succeed, and that’s a generous estimate. Investors know this and they play the numbers. Because you will be investing your time and career in just this one company, you need to really ask yourself- do you believe in this company, its mission, and most importantly- the founders, to turn this into a successful company.

    4. All in all, 2% for an engineer at an early stage startup is quite generous. Along with the salary which is not bad either, given the salaries are typically lower at such an early stage, and especially if there is a lot of equity involved.

    5. This package is not really comparable to FAANG. You don’t join a startup for the money, you join it because it offers you things a cushy FAANG job doesnt- it gives you a chance to make a real impact, be heard, grow and challenge yourself in ways you simply cant at a corporate job. Its not for everyone, but it sure its exciting.