4 ms·

Yes. I'm an older, successful dev in Chicago. I recently corresponded w/ a local startup CEO on linkedin. My skillset seemed to be a good fit for the role, but

Yes. I'm an older, successful dev in Chicago. I recently corresponded w/ a local startup CEO on linkedin. My skillset seemed to be a good fit for the role, but their stated top salary would be a 20K pay cut for me. So I ran a quick estimate, based on expected exit and expected dilution figures that I found on the internet (I know, grain of salt...), added a risk premium for myself, and found that I would want about 7% equity, in order to be interested. They said no, of course. My point is that (some) startups can't or won't pay for the technical skills they want. And that's their problem, not ours.

alpha_squared 10y ago
> ...found that I would want about 7% equity, in order to be interested. They said no, of course. You wanted 7% equity to make up for 20k? That seems a little excessive...
- logfromblammo 10y ago
  How would you know what excessive might be without valuing the company? Seems reasonable for a company with estimated current valuation of around $300k.
  - alpha_squared 10y ago
    That's true, I don't have a complete picture. I, probably falsely, assumed that he was being brought in as an employee in a team of at least a few people.
- mikestew 10y ago
  Or one might consider that after running the numbers, the company didn't seem to be worth all that much to begin with.
- mring33621 10y ago
  I used a very simple model for my estimate: 5 years to exit * 20K yr opp cost = 100K total opp cost I think my payback should be twice my total opp cost, so I want 200K at exit 1% chance of exit at 600M valuation after those 5 years I would expect my initial equity to be diluted to 50% of original value. Hence, I want 6.7% equity at the beginning of the 5 years. Note that, IMHO, I am being very conservative in calculating my opportunity cost for the lost salary.
  - nugget 10y ago
    Alternatively you could have accrued the salary deficit as convertible debt that would roll into the next funding round, at a discount -- which is a bit more anchored than estimating a 1% chance of exit at $600M valuation (if you were serious about wanting the job, which it sounds like you mostly weren't).
    - mring33621 10y ago
      Thank you for the suggestion! I'm not new to the idea of non-salary, future compensation but it is very new to me personally.
    - pbecotte 10y ago
      Is this something anyone has done? Seems like you would need lawyers to draw that up, but it appeals to me on a philosophical level...
  - mring33621 10y ago
    All these figures are subject to debate and would be more realistically modeled by probability distributions, but I was looking for a back-of-the-napkin quick estimate as a starting point for negotiation. I also neglected to make explicit my use of the expected value of the exit in my calculations. I hope this helps to clarify my thinking.
  - alpha_squared 10y ago
    > 1% chance of exit at 600M valuation after those 5 years Ah, I see, I wouldn't have taken that into account since I'm not sure it quite works out that way. It seems you've intertwined probability with opportunity cost, is that correct? EDIT: Thanks for the breakdown, by the way! I really appreciate the insight.
    - pbecotte 10y ago
      He did it correctly... Except he didn't account for the time value of money, which would have made the salary side even stronger.

alpha_squared 10y ago

> ...found that I would want about 7% equity, in order to be interested. They said no, of course. You wanted 7% equity to make up for 20k? That seems a little excessive...

logfromblammo 10y ago
How would you know what excessive might be without valuing the company? Seems reasonable for a company with estimated current valuation of around $300k.
- alpha_squared 10y ago
  That's true, I don't have a complete picture. I, probably falsely, assumed that he was being brought in as an employee in a team of at least a few people.
mikestew 10y ago
Or one might consider that after running the numbers, the company didn't seem to be worth all that much to begin with.
mring33621 10y ago
I used a very simple model for my estimate: 5 years to exit * 20K yr opp cost = 100K total opp cost I think my payback should be twice my total opp cost, so I want 200K at exit 1% chance of exit at 600M valuation after those 5 years I would expect my initial equity to be diluted to 50% of original value. Hence, I want 6.7% equity at the beginning of the 5 years. Note that, IMHO, I am being very conservative in calculating my opportunity cost for the lost salary.
- nugget 10y ago
  Alternatively you could have accrued the salary deficit as convertible debt that would roll into the next funding round, at a discount -- which is a bit more anchored than estimating a 1% chance of exit at $600M valuation (if you were serious about wanting the job, which it sounds like you mostly weren't).
  - mring33621 10y ago
    Thank you for the suggestion! I'm not new to the idea of non-salary, future compensation but it is very new to me personally.
  - pbecotte 10y ago
    Is this something anyone has done? Seems like you would need lawyers to draw that up, but it appeals to me on a philosophical level...
- mring33621 10y ago
  All these figures are subject to debate and would be more realistically modeled by probability distributions, but I was looking for a back-of-the-napkin quick estimate as a starting point for negotiation. I also neglected to make explicit my use of the expected value of the exit in my calculations. I hope this helps to clarify my thinking.
- alpha_squared 10y ago
  > 1% chance of exit at 600M valuation after those 5 years Ah, I see, I wouldn't have taken that into account since I'm not sure it quite works out that way. It seems you've intertwined probability with opportunity cost, is that correct? EDIT: Thanks for the breakdown, by the way! I really appreciate the insight.
  - pbecotte 10y ago
    He did it correctly... Except he didn't account for the time value of money, which would have made the salary side even stronger.