8 ms·

What is a fair compensation package for early hires if companies continue to keep stocks private and less liquid?

by emcq 11y ago

phillc73 11y ago
A decent salary, with leave benefits similar to a lot of other Western countries (4-5 weeks annual leave, sick leave, parental leave)?
- emcq 11y ago
  That sounds great! That should happen regardless. Put another way what does the investor gain putting money in a company that stays private?
  - elliotec 11y ago
    That is a good question.
  - hkmurakami 11y ago
    Dividends or getting their stake bought out. Pretty common for companies that never raised VC but did raise outside funding (and thus doesn't have a fund liquidation deadline). A family friend's parents have held a significant stake in a privately held company, where they've been paid a dividend for 20+ years.
- elliotec 11y ago
  In other words, just what you'd think a fair compensation package would look like.
- MC7447a 11y ago
  You do realize that in those other Western countries developers make far less than in the US? Even in the richer Western European countries like Germany, France, Netherlands, Sweden, etc, $50-$90k is pretty typical for 5yr+ experienced software engineers. Yes, that's total, not base, and before taxes which are higher than in the US.
  - true_religion 11y ago
    I must say... 50-90k seems like a huge range. The top part of the range is almost 2x as much as the bottom part. Considering these people are supposed to have all the same experience level, I'm surprised why there's such variation.
    - jnbiche 11y ago
      My guess is that he/she is describing a range across countries in Europe, which vary considerably in income for developers. If that's the case, it sounds reasonable to me. Also, they described 5+ years experience, not the same experience level.
      - phillc73 11y ago
        Perhaps I should have answered in more detail. The question was, as I interpreted it, what could early hirees be offered, besides share options, to entice them to join a company? My answer was along the lines of what would entice me. I've played the share option game, and did reasonably well at the time, but my last two years at the company was just "resting and vesting." I have no attraction to that again. So, what would be required to attract me to US startup with no goal of going public? A decent salary, 4-5 weeks annual leave, sick leave and parental leave. This would really just put me on a par with my current European employment situation, but it is the minimum I would require in this scenario.
    - em500 11y ago
      I wrote 5yr+, not 5yr, so no, they're not supposed to have all the same experience level. But in Western Europe (outside of some hot pockets like London, Switzerland, Luxembourg and maybe Oslo), 6 figure salaries are very rare in software, even for very experienced devs. I'm talking about the richer Europeans here (Germany, France, Netherlands, Austria, Sweden, Finland), Southern and Eastern Europe are much lower still. And this is before 40% income tax and 20% VAT (sales tax on consumer goods). I'm not arguing here that USA rules EU sucks cuz $$$. I get that Europeans get more social benefits and free time. I was just responding to phillc73, who was arguing for more of the Euro perks, that those perks are not cheap.
- dclowd9901 11y ago
  Most salaries don't even come close to the total comp package of a public company (after RSUs/options/etc). I'm talking maybe 1/2.
- optforfon 11y ago
  But... the whole point of compensating with stock is that they don't have the funding to pay more.... You can say "well they shouldn't hire people they cant afford" but that's not very realistic. When you start a company in your garage everyone is making sacrifices b/c they think they'll cash out later.
- rdl 11y ago
  2-3 weeks leave plus 2 weeks of holidays throughout the year plus sick time plus flexible schedule isn't that uncommon in tech. Maybe not in the earliest stage startups (although flexibility matters more than absolute hours for both employee and employee, in a lot of cases, if you enjoy what you're doing), but in Series C+ companies.
hkmurakami 11y ago
Even with the current compensation packages, if you add a clearly defined and always-exerciseable company buyback provision to the equity, it could be okay. (obviously the terms need to be actually equitable rather that being designed to screw over the employee)
venomsnake 11y ago
Dividends. I know it is a mythical beast, but isn't that the whole point of owning part of a business.
devit 11y ago
They could issue dividends or in theory offer something equivalent like "futures" offering to pay X% of the company revenue or profits in Y years or a legally binding promise to buyback stock on a future date at a valuation based on revenue or profits.
jonathankoren 11y ago
Follow on question: How can a company with no hope of an equity windfall for the employees attract and keep talent? Second follow up why would I join a company that will never go public, after the founders took money off the table?

What is a fair compensation package for early hires if companies continue to keep stocks private and less liquid?

by emcq 11y ago

What is a fair compensation package for early hires if companies continue to keep stocks private and less liquid?

A decent salary, with leave benefits similar to a lot of other Western countries (4-5 weeks annual leave, sick leave, parental leave)?

emcq 11y ago
That sounds great! That should happen regardless. Put another way what does the investor gain putting money in a company that stays private?
- elliotec 11y ago
  That is a good question.
- hkmurakami 11y ago
  Dividends or getting their stake bought out. Pretty common for companies that never raised VC but did raise outside funding (and thus doesn't have a fund liquidation deadline). A family friend's parents have held a significant stake in a privately held company, where they've been paid a dividend for 20+ years.
elliotec 11y ago
In other words, just what you'd think a fair compensation package would look like.
MC7447a 11y ago
You do realize that in those other Western countries developers make far less than in the US? Even in the richer Western European countries like Germany, France, Netherlands, Sweden, etc, $50-$90k is pretty typical for 5yr+ experienced software engineers. Yes, that's total, not base, and before taxes which are higher than in the US.
- true_religion 11y ago
  I must say... 50-90k seems like a huge range. The top part of the range is almost 2x as much as the bottom part. Considering these people are supposed to have all the same experience level, I'm surprised why there's such variation.
  - jnbiche 11y ago
    My guess is that he/she is describing a range across countries in Europe, which vary considerably in income for developers. If that's the case, it sounds reasonable to me. Also, they described 5+ years experience, not the same experience level.
    - phillc73 11y ago
      Perhaps I should have answered in more detail. The question was, as I interpreted it, what could early hirees be offered, besides share options, to entice them to join a company? My answer was along the lines of what would entice me. I've played the share option game, and did reasonably well at the time, but my last two years at the company was just "resting and vesting." I have no attraction to that again. So, what would be required to attract me to US startup with no goal of going public? A decent salary, 4-5 weeks annual leave, sick leave and parental leave. This would really just put me on a par with my current European employment situation, but it is the minimum I would require in this scenario.
  - em500 11y ago
    I wrote 5yr+, not 5yr, so no, they're not supposed to have all the same experience level. But in Western Europe (outside of some hot pockets like London, Switzerland, Luxembourg and maybe Oslo), 6 figure salaries are very rare in software, even for very experienced devs. I'm talking about the richer Europeans here (Germany, France, Netherlands, Austria, Sweden, Finland), Southern and Eastern Europe are much lower still. And this is before 40% income tax and 20% VAT (sales tax on consumer goods). I'm not arguing here that USA rules EU sucks cuz $$$. I get that Europeans get more social benefits and free time. I was just responding to phillc73, who was arguing for more of the Euro perks, that those perks are not cheap.
dclowd9901 11y ago
Most salaries don't even come close to the total comp package of a public company (after RSUs/options/etc). I'm talking maybe 1/2.
optforfon 11y ago
But... the whole point of compensating with stock is that they don't have the funding to pay more.... You can say "well they shouldn't hire people they cant afford" but that's not very realistic. When you start a company in your garage everyone is making sacrifices b/c they think they'll cash out later.
rdl 11y ago
2-3 weeks leave plus 2 weeks of holidays throughout the year plus sick time plus flexible schedule isn't that uncommon in tech. Maybe not in the earliest stage startups (although flexibility matters more than absolute hours for both employee and employee, in a lot of cases, if you enjoy what you're doing), but in Series C+ companies.

hkmurakami 11y ago

Even with the current compensation packages, if you add a clearly defined and always-exerciseable company buyback provision to the equity, it could be okay. (obviously the terms need to be actually equitable rather that being designed to screw over the employee)

venomsnake 11y ago

Dividends. I know it is a mythical beast, but isn't that the whole point of owning part of a business.

devit 11y ago

They could issue dividends or in theory offer something equivalent like "futures" offering to pay X% of the company revenue or profits in Y years or a legally binding promise to buyback stock on a future date at a valuation based on revenue or profits.

jonathankoren 11y ago

Follow on question: How can a company with no hope of an equity windfall for the employees attract and keep talent? Second follow up why would I join a company that will never go public, after the founders took money off the table?